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German balancing system still needs big operator input

08 Mar 2011 16:23:36 | esgm

This winter, German gas hubs NetConnect Germany (NCG) and GASPOOL have again needed to buy gas in order to balance the country's gas network, the two hub operators said.

In addition, GASPOOL's balancing costs will be even higher this winter than the difficult previous winter, said GASPOOL's managing director Ulf Kreyenbrock.

Like last year, both hub operators recorded periods of major shortfalls in the system. Since October 2010, NCG has spent €100m on balancing energy, the company told ICIS Heren. In November 2010, GASPOOL's balancing costs reached a peak of €20m, the hub operator's data show - and the managing director expects the total costs this season to top the previous year's expenses.

From October 2009 until December 2010, GASPOOL had to raise €153m, while income from balancing energy was just €24.5m. In November 2009 alone, balancing costs reached a high of €25m, according to the managing director. The more active NCG hub had to raise €180m between October 2009 and April 2010, the company told ICIS Heren.

In an attempt to lower the level of balancing energy required, the regulator Bundesnetzagentur (BNetzA) launched an amendment to the country's gas balancing law (Mitteilung Nr.4), GABI gas, in March 2010. With this ruling, BNetzA put several incentives in place aimed at preventing shortfalls in the system, effective from 1 April.

However, this has not had a significant effect on the amount of energy needed to balance the system, Kreyenbrock said last month. Still, GASPOOL's situation is better this winter compared with the 2009-2010 season, when the company found itself in a particularly difficult position. As a recently started business, the hub was not able to secure bank loans to cover the time between paying the balancing costs and receiving reimbursement from market participants. Therefore, GASPOOL shareholders had to raise the funds to cover balancing costs.

Since then, the hub operator has introduced a payment plan with fixed installments from an account dedicated to covering the costs of balancing the system - a solution that was approved by BNetzA in the March 2010 amendment. In the current season, GASPOOL is able to cover balancing costs mainly through this account, and does not need the financial support of its shareholders, the company told ICIS Heren.

In addition, GASPOOL now purchases balancing energy from various sources. In May, the hub operator started buying balancing energy partly from the European Energy Exchange (EEX). According to Kreyenbrock, this can be cheaper then buying it through the hub's own platform. On the other hand, the deals done through the EEX require immediate payment, while other transactions have to be paid within four to six weeks. "The EEX is important for our portfolio, but only as a supplement to our own platform," Kreyenbrock said.

NCG also purchases balancing energy from its own platform as well as from the exchange. In contrast to GASPOOL's payment plan from a dedicated account, NCG claims to cover balancing costs through bank loans and the financial backup from stakeholders alone.

The German hub operators can also expect to get their own source of income soon - through the implementation of a new hub fee, which BNetzA is aiming to introduce this year (see ESGM 18 January 2011).

BNetzA told ICIS Heren that there are no concrete plans for changes in the balancing regime yet. The regulator stressed, however, that it will present an evaluation paper to the German economics ministry about the effects of GABI gas on 1 April 2011. "This will also contain suggestions to improve the current system", BNetzA added, but did not comment on the details. JR

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