Germany to implement EU natural gas balancing code between 2015-2016

04 April 2014 16:00 Source:ICIS

Shippers in Germany could potentially be punished for causing imbalance in natural gas systems on an hourly basis, according to proposals from the country’s regulator published on Friday.

The German balancing regime for natural gas is likely to change significantly between 2015-2016, in order to comply with the EU’s balancing code, said regulator the Federal Network Agency (BNetzA).

The changes are so Germany will meet the EU’s deadline for the code’s implementation by member states of 1 October 2015 for the majority of the new rules, but not for all.

BNetzA published an extensive list of suggested measures which are up for consultation until 5 May.

Intra-day incentive system

While the regulator recommended keeping the daily balancing system, it suggested adding a new intra-day incentive system. Under the suggested system, shippers would be punished for imbalances on an hourly basis. In contrast to the current system, under which any imbalance results in the payment of a fee, the new penalties shall only be paid under two conditions.

Firstly, the participant in question 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.

The intra-day system is aimed at preventing participants from making their nominations during a short period instead of spreading it out over the day, the regulator said.

The regulator’s suggestions are based on recommendations made by the hub operators and the many German transmission system operators (TSOs). While BNetzA amended these recommendations on several points, it did agree with the companies’ planned time line. 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.

Priority for exchange procurement

In terms of balancing energy procurement, BNetzA said it aims to further prioritise exchange trade over the hub operators’ own bilateral platforms. It added that the platforms are only to be considered an interim solution for purchasing products that are not available at the exchange, such as products that include the guaranteed delivery at a certain grid point.

The regulator said it is willing to approve the bilateral platforms’ use for another five years. Under this scenario, the hub operators would have to report to BNetzA on an annual basis, evaluating if the platforms are still necessary.

Last year, market participants urged the hubs to merge their bilateral balancing platforms to reduce bureaucracy and increase liquidity as well as transparency. Some also suggested getting rid of the bilateral platforms and moving all balancing procurement to the exchange.

Since the implementation of Germany’s new balancing target model from 1 October last year, there has already been a significant shift towards exchange-based procurement. NCG and GASPOOL now buy and sell about 80-90% of the gas for balancing their networks through standardised products on the exchange, while before October, the vast majority was still purchased via the hubs’ own platforms ( see ESGM 31 January 2014 ).

Shorter nomination periods

On a couple of issues, the regulator passed responsibility back to the many German TSOs, saying that these points should be dealt with in the annually updated cooperation agreement between the companies.

For one thing, the transmission system operators (which own the NCG and GASPOOL trading points) need to shorten the nomination periods at the hubs to 30 minutes, down from two hours.

For another, they are supposed to switch the grid account settlement for smaller end customers from a monthly to a daily system, bringing it in line with the general daily balancing regime, BNetzA said.

In their cooperation agreement for 2012, the system operators introduced a monthly, instead of the previously annual, settlement of gas grid accounts in the NCG and GASPOOL market areas ( see ESGM 1 October 2012 ). When a distribution system operator exceeds its standard load profile by 10% or more, by taking more gas from the TSO than expected on a monthly basis, there is an immediate settlement payment.

Apart from switching this system to a daily basis, the regulator also suggested increasing the acceptable imbalance mark to 15%. Johanna Blackader

By Johanna Blackader