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German TSOs face criticism for temperature-based natural gas product

10 Oct 2012 16:09:00 | esgm

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Germany's natural gas transmission system operators (TSOs) face widespread criticism from market participants for a suggested temperature-based transport product for new storage facilities, comments from a market consultation show.

The majority of participants agreed that the suggested product - which switches from firm to interruptible depending on the temperature - stands in contrast to the storage market's needs for short-term flexibilities.

The TSOs suggested the product in August when publishing their scenarios for Germany's grid development plan 2013 (see ESGM 10 August 2012), saying that the temperature-based element is aimed at reducing the costs related to connecting new storage facilities to the grid.

"The scenarios assume a purely seasonal use of storage facilities, but this does not reflect the reality. Storage capacity is increasingly used independently of temperature," German utility RWE said in its comment.

"The correlation between market prices and temperatures is significantly less strong than assumed by the TSOs," Norwegian energy major Statoil agreed.

These statements are in line with hub prices seen in the previous two seasons, with the average NCG Day-ahead settlement price during this year's summer season coming to €24.66/MWh, standing €0.082/MWh above the previous winter season's average, according to ICIS data.

However, the suggested temperature-based product matches a traditional model of storage injections while prices are low during the summer and storage withdrawals when prices rise during the winter due to higher demand for heating. It offers 100% firm capacity for injections for times when the outside temperature rises above 20°C. This percentage drops to 60% firm injection capacity, when temperatures drop below 20°C and again to 30% when temperatures go below 15°C. At a temperature of below 5°C the entire capacity becomes interruptible.

For withdrawals, 100% of capacity is firm for times when temperatures drop below minus 10°C. This percentage drops to 65% firm withdrawal capacity, when temperatures rise above minus 10°C and again to 35% when temperatures rise above 0°C. At a temperature of above 5°C in the north of Germany or above 10°C in the south, the entire withdrawal capacity becomes interruptible.

Apart from the fact that participants are generally sceptical of the temperature-based approach, they have also criticised the product as arbitrary and too complex. JR

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