ERGEG Regional Initiative Region SouthSouth East 4th Stakeholder Group meeting Italian Balancing Poi

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ERGEG Regional Initiative Region
South-South East 4th Stakeholder Group meeting
Italian Balancing Point TF How to create
regional markets for balancing in practice
Athens 10 June 2008
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How to create regional markets for balancing in
practice

• The development of hub as Balancing points has
  been identified by ERGEG as one of the KEY
  objective of the SSE Regional Initiative
• The IBP TF recognized that implementation of a
  balancing market would positively impact the
  functioning of the overall gas market
• The balancing market mechanism contributes to
  improve the liquidity of the hub and the trading
  of gas

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Create regional markets for balancing in practice
The TF point of view

• In principle the balancing point should have a
  regional extention
• In practice however the SSE regional market
  lacks
• - an harmonized business environment
• - a well meshed gas grid
• - adequate available interconnection capacities
• Two/three balancing points in the SSE region
  is a more realistic objective

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Create regional markets for balancing in practice
The TF point of view

• As a first step develop two/three hubs in the
  region acting as balancing points for their
  reference area.
• In the longer term the local balancing points
  could evolve to a regional dimension.

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Focus on the Italian Balancing PointThe IBP
Activity

• Workshop with the Italian Association of Energy
  Traders (Aiget) November 2007
• Meeting with the Regulatory Authority -
  December 2007
• - March 2008
• Meeting with the Italian Transmission Operator
  (SRG) - January 2008
• Meetings with the main Network Users

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A balancing point for the Italian gas marketIBP
TF Preferred features

• Daily balancing mechanism higher guarantee for
  operators with small portfolio easier to manage
• Independent Market Operator
• Anonymous exchanges
• Clearing price published ex-post
• Tolerance level fixed or decreasing with the
  amount of demand
• Ex-post trading as long as the market is not
  well-functioning and liquid
• Back-up back-down services provided by the market

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Italian Balancing Point
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Focus on the Italian Balancing PointConcret
Developments

• April 2008 First Consultation Document on
  Potential Evolution of the Balancing Service in
  the Natural Gas Market (DCO 10/08)
• Main topics proposed for discussion
• - Length of the Relevant Period
• - Balancing responsibility
• - Balancing Market Operation
• - Imbalance Charges
• Next steps
• Consultation Document on a Gas Exchange
• Second Consultation Document on the Gas
  Balancing Market

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Consultation Document on the Italian Balancing
MarketTopics under discussion

• Length of the Relevant Period
• Choice of daily or hourly period taking into
  account
• Availability of info or of hedging possibilities
  on shippers imbalance position over the relevant
  period
• Possibility for gradual implementation of hourly
  balancing limited to main inputs and offtakes
• Harmonisation at international level needed

The Cons Doc suggests the need for a C-B analysis

• Recommendation It is important that network
  users are not exposed to undue risks that they
  cannot manage effectively and/or without
  incurring inefficient costs that could create
  barriers to entry to the market (GGPGB 1.9)

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Consultation Document on the Italian Balancing
MarketTopics under discussion

• Balancing Responsibility
• Snam Rete Gas responsible for dispatching and
  residual gas balancing buys gas from market
• Centralised platform for gas balancing offers
• Independent Balancing Market Operator (open)

• Imbalance charges
• Cost Reflective
• Promote shippers efficent behaviour

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Consultation Document on the Italian Balancing
MarketTopics under discussion

• Operation of the Balancing Market
• Shipper offer balancing gas (day a-head)
• Criteria for selection of offers
• Price for selected offers

• Recommendation In the absence of a well
  functioning/liquid within day market, allowing
  market participants to manage their imbalance
  positions efficiently, the TSO should have or
  should allow systems to be put in place to
  facilitate the pooling and trading of imbalance
  positions. (GGPGB 1.18)

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How to create regional markets for balancing in
practice

• Create two-three active balancing points in the
  south-south east region
• Given the present actual possibilities for short
  term gas trading, the points should be based on
  compatible balancing regimes (fully harmonised in
  perspective)
• Attention should be paid that regimes evolves
  with increasing short term trading possibilities
• The proposal for the Italian Balancing Market is
  in line with the above requirements