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Intra-day balancing to worsen business for German natural gas-fired power plants

12 May 2014 15:35:39 | esgm


The suggested system, under which large industrial consumers in Germany are penalised for causing natural gas grid imbalances on an hourly basis, is likely to put a further strain on the business of gas-fired power plant operators.

This is the opinion of several companies that submitted their comments to a market consultation.

German utility RWE said in its comment to the regulator, the suggested tool generally punished flexible use of gas-fired power plants, removing any remaining incentive to run the plants and potentially leading to further shut-downs.

In case a power plant operator decided they wanted to run their plant without having planned for it on the previous day, the use would not make economic sense anymore because of the new penalties, RWE added.

The penalties suggested by the Federal Network Agency (BNetzA) are aimed at industrial customers with an annual consumption exceeding 1.5GWh, and they would have to be paid under two conditions. Firstly, the participant in question needs to have exceeded the 7.5%-tolerance level and needs to have worsened the situation by making an already long system longer or an already short system shorter. Secondly, the imbalance needs to have caused costs.

Last week, Germany’s office of the European Federation of Energy Traders (EFET), EFET Deutschland, criticised the regulator for considering causing significant IT-related costs both for transmission system operators (TSOs) and shippers by implementing the new system ( see ESGM 8 May 2014 ).

According to EFET – and many other market participants who have commented on the suggested changes – an intra-day incentive system is unnecessary, as it makes economic sense for shippers to inject gas into the system at overall steady rates, and extreme hourly imbalances are a rare occurrence.

Austrian exemption

Some criticism also came from Austrian market participants who urged the German regulator to loosen the rules for penalties triggered by imbalances at certain German-Austrian border points.

Since 1 October last year, the two Austrian market areas Tyrol and Vorarlberg, which do not have a physical connection with the rest of the Austrian grid and only serve to supply gas to end customers, have been integrated into the German NCG zone. Nominations take place at the NCG, but volumes that deal under the arrangement are considered to have been delivered in the respective Austrian area.

The Austrian regulator E-Control said in its comment that the cross-border points between NCG and Tyrol/Vorarlberg should be subject to the same rules as connection points for large industrial customers in Germany. That means they should also profit from the rule, under which they can off-take from the grid up to 7.5% more or less than expected without being subject to penalties.

Under the current suggestions, these grid points are treated as any other German cross-border or cross-market zone point, at which any daily imbalance results in a penalty.

Shorter nomination periods

Germany’s balancing regime is likely to see several significant changes between 2015-2016, in order to comply with the EU’s network code on balancing. Last month, BNetzA published an extensive list of suggested measures, including an intra-day incentive system.

The suggested changes also included shorter nomination periods at the hubs, of 30 minutes, down from two hours. The majority of market participants welcomed this suggestion in their comments, but added the nomination periods for storage sites and production plants will also have to be shortened to 30 minutes – otherwise, the change would have little effect.

The majority of changes are scheduled to be introduced by 1 October 2015, but the intra-day incentive system is planned to be launched one year later.

BNetzA is currently reviewing the feedback and plans to hold a second consultation round after potential changes have been made to the draft. Johanna Blackader

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