directie toezicht energie, bonn ws 8 february bonn 1 sg workshop: secondary markets for...

Directie Toezicht Energie, Bonn WS 8 february Bonn

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SG Workshop:Secondary markets for

interconnection capacity:way to adress contractual

congestion

SG Meeting Bonn February 8th 2007


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Agenda workshop 14:00 – 14:10 Introduction of the workshop by the moderator 14:10 – 14:30 Presentation of the results on a study of the performance of

the secondary market in the NW-European region 14:30 – 15:20 Discussion on results study and the focus of the workshop 15:20 – 15:30 Recapitulation by moderator of the discussion

15:30 – 15:45 Coffee Break

15:45 – 16:00 Introduction of the discussion on the way forward 16:00 – 16:45 Discussion 16:45 – 17:00 Recapitulation by moderator and conclusion workshop


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Introduction of the workshop (1):Secondary market is not performing its task as an effective congestion management procedure

Main task secondary market:

effectively deal with contractual congestion on

interconnection points

Current status quo:

secondary market is not effective in

solving contractual congestion for capacity


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Introduction of the workshop (2):Objectives of the workshop is to provide Enabler Group with input for Implementation Plans

Quick wins: – changes in the current secondary market design (input for the

EFET/Operators workshop on DA Capacity Auctions);– improvements in the current congestion management

procedures (primary capacity):• interruptible capacity product

– Input for other EU capacity work (EASEE-gas, EFET etc.)Long term wins:

– incentives for shippers to offer capacity on the secondary market:

• current primary market (input for the primary market group);• improvements in the current firm UIOLI design


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6Results of the Study on performance

secondary market

Includes Questionnaires response

Thank you!


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Outline of the study

1. Current situation;

2. Results of the questionnaire;

3. Qualitative analysis performance sec. market.

4. Way forward


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Primary Allocation Method(TSO)

interruptible primary capacity

available capacity

Firm UIOLI(TSO)

Interruptible UIOLI(TSO)Secondary

Market(shippers)

firm primary capacity

unfulfilled demand

demand

unused firm primary capacity

uitlized firm primary capacityuitlized interruptible

primary capacity

utilized firm and interruptible

secondary capacity

unneeded firm and int.

capacity

1. Current Situation (1):Congestion management procedures


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1.Current Situation (2):characteristics current design of the secondary market

Bilateral market;

Online bulletin board with centralized information on specific

amount of capacity offered/requested, party and price (facilitated

by the TSO)

No coordinated entry-exit product on an interconnection point;

Capacity rights or usage right;

Implementation lead time of maximum 10 days, average around

5 days.


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2. Questionnaire analysis performance congestion management procedures:secondary market is not successful in solving contractual congestion Questionnaires analysis shows a clear and consistent overall

picture of the performance of the congestion management

procedures in the NW-European region:Secondary market:– No transactions on the majority of NW-European interconnection

points;– Active secondary markets are illiquid;

Other congestion management measures status quo:– Firm UIOLI has never been applied;– Interruptible capacity is the principal congestion management

procedure


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3. Qualitative analysis (1):prim. cap. right owners see other uses for capacity rights than offering them on the secondary market

Possible motives shippers for not offering capacity:– Reducing risks (risks of not being able to follow up on contractual obligations

outweigh the profit that can be made on the sec..market);– Retain flexibility for trade (profit that can be made by trading between hubs

is greater than that an be made by trading the capacity on the sec. market); Assumed motive by shippers for other shippers for not offering

capacity:– Anti-competitive behavior (without prejudice)

Motives shippers for not buying capacity:– Lack of trust in supply;– ‘Competition’ from other sources of capacity/commodity;– Shortcomings in current design and facilitation.


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3. Qualitative analysis (2):behavior of shippers is the result of organizational culture, impact primary market, lack of incentives and of shortcomings in the sec. market design

Primary capacity right holders show an overall lack of ‘an

appetite for trade’;

Impact (pre-liberalization) long term legacy contracts resulting

from the primary market allocation mechanism;

Lack of strong incentives:

– positive: prices on the prim. market are relatively low

– negative: firm UIOLI has never been applied

Shortcomings in the design of the secondary market


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3. Qualitative analysis (3): shortcoming secondary marketShippers experience the following shortcomings:

– non-transparency on available capacities, prices and capacity products;

– trade is non-anonymous on most markets;– lack of coordination between markets on the same

interconnection points – irregular trade (no concentration of supply and demand on fixed

times); – lack of standardized contracts;– a relatively long ratification time of a transaction by the TSOs;– some shippers also indicate that they experience (perhaps

perceive) legal bottlenecks for transactions on the secondary market.


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4. Way forwardObjectives of the workshop is to provide Enabler Group with input for Implementation Plans

Quick wins: – changes in the current secondary market design (input for the

EFET/Operators workshop on DA Capacity Auctions);– improvements in the current congestion management

procedures (primary capacity):• interruptible capacity product

– Input for other EU capacity work (EASEE-gas, EFET etc.)Long term wins:

– incentives for shippers to offer capacity on the secondary market:

• current primary market (input for the primary market group);• improvements in the current firm UIOLI design


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Discussion:subjects of discussion

Remarks on the general analysis of the secondary

market performance?

Remarks on the objective of the workshops?


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Outcomes discussion


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21 II Discussion on the way forward


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Discussion on the way forward (1):discussion on quick wins and long term objectives

Quick win

Long termwin


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Discussion on the way forward (2):timetable discussion


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Introduction discussion:options for changes in the current secondary market design => tomorrow to be further discussed in EFET/Operators workshop

Market mechanism Bilateral; Auction, Broker

Facilitating party TSO; trading office

Method of facilitation

Level of coordination No coordination; joint entry/exit product

Capacity products tradable

Level of transparency Specific vs general transparency

Regularity of trade

Implementation lead time Standard (max 10 days); direct implementation

Day; week; month; season; year

Central market place

Concentration of supply and demand (regular); irregular trade

(Various locations)


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Introduction discussion:Firm UIOLI mechanism

Performance:

Quantitative data shows that the firm UIOLI mechanism has never been applied in

NW-Europe

Current issues with the Firm UIOLI mechanism: Difficult to prove hoarding for anti-competitive reasons; Procedures Firm UIOLI take long and are time consuming.

Brainstorm: Formulate clear criteria that define hoarding for anti-competitive reasons; Evaluate current firm UIOLI procedures and make them less complex and time

consuming (for example by shortening the period during which hoarding for anti-

competitive reasons needs to be proved)


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Outcome discussion:Firm UIOLI mechanism


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Introduction discussion:Interruptible UIOLI mechanism

Performance:Interruptible is a popular capacity type on the primary market for

transmission capacity

Current issues with the Interruptible UIOLI mechanism: Shippers indicate they experience the product non-transparent;

– How is the amount of interruptible capacity that is offered on the primary

market determined by the TSO;– What are the criteria for interruption.

Brainstom: Formulate and publish clear criteria for the interruption of capacity; More transparency on utilization rate.


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Outcome discussion:Interruptible UIOLI mechanism


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Introduction discussion:Releasable capacity

– Rule 1 – For any shipper having subscribed more than 20% of

marketable firm annual capacities on the following points, a share R

of the part of its subscription exceeding 20% of marketable firm

annual capacities is converted into releasable capacities.

– Rule 2 - Releasable capacities are released, if requested by

GRTgaz, month by month, partially or totally, only if there is no

more or not enough available firm capacities.


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Outcome workshopQuick win(objective of this workshop)

Long termobjectives(outside the scope of this workshop)


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Back-upOverview

Motivations for not trading on sec.

market

Lack of appetite for trade

Influences

Impact primary marketInfluences

Lack of incentivesInfluences

Design of the secondary market

Influences

Outside the sphere of

direct influence

Long term recommendations

Short term recommendations

directie toezicht energie, bonn ws 8 february bonn 1 sg workshop: secondary markets for...

Documents

bonn ws

capacity slide

performance secondary

directie toezicht energie

interconnection capacity

current primary market

impact primary market

conclusion workshop