Developing the gas balancing model for implementation in 2022

1. The BAM is in close dialogue with Evida and Nordion Energy regarding an investigation of how to provide enough data to the shippers. Energinet Gas TSO expects that there are investments needed to ensure enough data. 
   
   
2. Shippers will also be involved in this process.  

1. The BAM is in close dialogue with Evida and Nordion Energy regarding an investigation of how to provide enough data to the shippers. Energinet Gas TSO expects that there are investments needed to ensure enough data. 
   
   
2. Shippers wil also be involved in this process.  

The BAM will continue to trade the within-day product at night for the coming gas day, as the day-ahead will not be delivered before the gas day D+2.

The causers in the specific hour (se illustration), will be allocated the full amount of the traded gas instantaneously, which will bring the ASB into the green zone. Renominations and trades will be considered in accordance with the regular nomination rules. 

Energinet Gas TSO will investigate this possibility, from a market, legal and technical perspective, in dialogue with Gas Storage Denmark.

Example:

At 8 am the Accumulated System Balance, ASB is published. Each shipper will also get a signal of its Individual Accumulated Shipper Balance, IASB, and thereby the shipper will know if he or she is a causer or a helper up to this hour during the gas day. In this example there are two shippers that are causers.

At 8 am, ASB is 500 MWh outside the green zone, and this creates a signal to the BAM that it must trade an amount that will ensure that the ASB will come inside the green zone. The BAM will therefore trade 500 MWh equal to 28 MW in the Within-day market for ETF at EEX (with the lead time, there is 18 hours back in the gas day). 

After the BAM has sold 500 MWh, this amount will be pro rata allocated to the two shippers that are causers. Shipper I is long with 500 MWh, and Shipper II is long with 2,000 MWh. Therefore, Shipper I will be allocated 100 MWh, and Shipper II will be allocated 400 MWh. The causers are allocated these amounts instantaneously and even though the actual delivery of the gas will happen during the last 18 hours of the gas day. Therefore the BAM will reserve some flexibility to be able to cooperate with this delayed response. The instantaneously allocation of gas to the causers will have the effect that the ASB (if all other things are equal) will be in the green zone the hour after.

Shipper I and Shipper II will have to pay the marginal price for the gas that is allocated their portfolio.  If the BAM has traded twice; 16 MW to 10 EUR/MWh and 10 MW to 10.50 EUR/MWh, the marginal price will be 10.50 EUR/MWh. 

The current balancing model (overall method implemented as of 1 October 2014) is in overall terms described as a daily balancing model with no within-day obligations. The current concept is that every hour, the expected system commercial balance, E(SCB) for the entire gas day is calculated based on nominations and expected offtake in Denmark/Sweden for all hours of the gas day.

The main rationale behind the current daily balancing model with no added restrictions is the characteristics and parameters of the current physical system. In short, there are no normal flow scenarios or situations that cannot be handled in the physical system within-day, and thus there is no need for restricting shippers in their daily input-offtake during the gas day. 

The balancing model has been subject to several additions and amendments, since it was first implemented in October 2014, but the overall method has not been changed.

The implementation of the Baltic Pipe Project, enabling a gas flow from Norway through Denmark to Poland, will result in significant changes to the Danish transmission system both in terms of flexibility and possible flow volumes.

One of the main consequences of this transition is that the daily balancing model cannot absorb all possible imbalances during a gas day, even though network users are in balance end-of-day. This means that even in a normal situation, network users can bring the system out of its physical boundaries during a gas day, potentially jeopardizing the system integrity, if the current daily balancing model continues without amendments.

This issue is well-known in other EU countries, and has been for many years, also before the Balancing Network Code was developed. TSO’s such as Net4gas (Czech Republic), Gas Connect Austria and Fluxys (Belgium) are all characterized as transit systems, where the dominant flow directly enters and exits the system, and where the volumes for the domestic market is significantly lower than the transit volumes.

The Balancing Network Code includes clauses on within-day obligations, which were especially added to accommodate the potential large imbalance challenges of transit systems during a gas day, where the daily balancing timeframe is not sufficient in all normal flow scenarios. For the same reason, the 3 systems mentioned above have all implemented within-day obligations as add-on to the daily balancing regime.

For Energinet Gas TSO and Nordion Energi, this gives a clear reasoning for including within-day obligations in the future balancing system when the Baltic Pipe commences; the transit flow will potentially challenge the system integrity within-day, and within-day obligations are the specific mean to mitigate such a challenge.

Energinet Gas TSO and Nordion Energi will implement a system-wide within-day obligation (Balancing Network Code, Article 25 (1)) with equal hourly restrictions throughout the gas day. The main benefit of choosing the system-wide within-day obligation is that the current green zone balancing system is already system wide by collecting and informing on the aggregated commercial balance position of all shippers.

Also, when Energinet Gas TSO first implemented the current green zone model, it was very much inspired by the balancing systems in the Netherlands (GTS) and Belgium (Fluxys). Energinet Gas TSO implemented a similar model, but without including the system-wide within-day obligation, which is common in both systems, as this was not required given the parameters of the Danish physical system at the time. Instead, the Estimated System Commercial Balance was implemented to create the system wide daily balance.

The main reason for Energinet and Nordion Energi not choosing the balancing portfolio WDO is that it is characterized as being sub-optimal compared to the system-wide WDO. With a system-wide WDO, you obtain the benefit of netting out different network user’s positions, which gives the opportunity to utilize the full potential of the network flexibility.

With a balancing portfolio WDO each network user is allocated an individual range or “green zone” to stay within. If a single network user is out of range, the respective network usere will be faced with a charge, even though the general system might be sufficiently balanced.

Based on this, and based on the reasoning why implementing system-wide WDO, Energinet and Nordion Energi find that the system-wide WDO is more beneficial for both the single network users and the system as a whole, compared to the balancing portfolio WDO.

To properly answer this question, a more detailed description of how such a WDO could be implemented, is required.

In Energinet’s and Nordion Energi’s analysis, an entry-exit WDO is considered between the entry point from Norway and the exit point towards Poland. This means that the variation between the inflow from Norway and the offtake towards Poland must stay within certain hourly boundaries. In a simple example, a limit of 1,000 units could be considered meaning that the difference between entry EPII and exit Faxe must not differ more than 1,000 units per hour.

Hereby follows a simple example of how such a model could work in practice.

Example: We focus on the following network users in the Danish-Swedish gas system on a given gas day each with a very simple gas portfolio:

• Shipper A, bringing gas from Norway directly towards Poland
• Shipper B, bringing gas from Norway to Danish end-consumers
• Shipper C, buying gas on the Danish market and bring it to Poland
• Shipper D, bringing gas in from Ellund to the Swedish market

In a given gas hour, the four shippers have the following entry-exit flow. The gas flows related to either entry from Norway or exit towards Poland are highlighted in bold:

• Shipper A: entry = 10,000 units; exit = 10,800 units; balance = 800 units short
• Shipper B: entry = 5,000 units; exit = 6,000 units; balance = 1,000 units short
• Shipper C: entry = 3,200 units; exit = 3,000 units; balance = 200 units long
• Shipper D: entry = 2,500 units; exit = 2,600 units; balance = 100 units short

In total, this means that the system is short with 1,700 units in that specific hour. When we focus isolated on the balance between the entry from Norway and exit towards Poland, the balance between these two specific points are:

• Entry: 10,000 + 5,000 = 15,000 units
• Exit: 10,800 + 3,000 = 13,800 units
• Difference = 1,200 units long

With a variation limit of 1,000 units, this means that the variation is out of the boundaries with 200 units on the long side. The causers in this case would be Shipper A and Shipper B, as they are bringing too much gas into the system from Norway, compared to what is delivered towards Poland. However, both shippers are also short in the total system.

The example illustrates a number of issues with the entry-exit WDO in a Danish-Swedish context:

• The isolated variation between the entry- points relevant for the WDO does not automatically cause an issue for the total balance of the system, as gas can enter and exit the system at a number of points. In the design this could mean that the variation between the two points should be held up against the total balance of the system to create the right incentive to balance
• This means that Energinet and Nordion Energi in any case would have to implement the system-wide WDO, including the ASB (Accumulated System Balance) and IASB (Individual Accumulated Shipper Balance) , in order to calculated the balance per hour for the whole system. Also, it would not be possible to isolate the hourly balance for only the relevant entry-exit points, as shippers could be active both in the current system and at the new points (e.g. a Danish shipper buying gas in Norway for the end-consumer market)
• This also means that the expected data model, creating an hourly balance for all shippers, would also need to be implemented to the same degree as with the system-wide WDO alone when using the entry-exit WDO, as it is not possible to isolate shippers to certain parts of the system

In general, the entry-exit WDO seems to be designed for systems where the transit flow is relatively isolated from the rest of the system. In the Danish-Swedish context, the new infrastructure is fully integrated into the current system with full possibility to utilize the different entry-exit points.

There is only one country in the EU, who has implemented the entry-exit WDO, which is Bulgaria. ACER described the Bulgarian WDO in 2017: “Severe restrictions to renominations are applied that limit network users’ ability to manage their imbalances and to supply flexibility into the short-term market “ (https://acer.europa.eu/Official_documents/Acts_of_the_Agency/Publication/ACER%20Report%20on%20the%20implementation%20of%20the%20Balancing%20Network%20Code%20(Second%20edition)%20Volume%20II.pdf).

For Energinet and Nordion Energi, the example above and the issues derived therefrom, illustrates the reasoning for why the entry-exit WDO would not work in practice in the Danish-Swedish context.

It is Energinet and Nordion’s interpretation that in principle it would be possible to combine the system-wide WDO with the portfolio WDO. However, Energinet and Nordion find that the combination would undermine the benefits of the system-wide WDO and would bring in the downsides of the portfolio WDO, described in a former question-answer regarding portfolio WDO.

The clear benefit of the system-wide WDO is that the Balance Area Manager (BAM) would only trade, when all flexibility is utilized, also taking into account shippers having positions in the opposite direction. Adding a new limit per shipper via the portfolio WDO will in practice result in always reaching a shipper limit before reaching the optimal limit, and thereby it will undermine the function and benefit of the system-wide WDO.

The prioritized order will be based on size in terms of yearly volumes, as this is the most important parameter, when most large end-users will be collected, and will also include large volatile customers.

It is not possible to publish the exact list, as this is classified information. However, the overall principle will be known.

Energinet and Nordion will discuss needed control mechanisms, in cooperation with the Danish and Swedish DSO’s.

Yes, see minutes from User Group on 3^rd March 2021

We will investigate if this is possible

As soon as possible, we will strive to inform you early 2022

No, the shippers individual smoothing profile will be based on the shipper’s nomination on the Smoothing Allocation Point (SAP).

Yes, you can send the first nomination on SAP before 14:00 before the gas day and latest at 04.00 before the gas day.

No, only on shipper level

Gas Storages Denmark are looking into shorter lead time in coordination with the TSO. However, Gas Storage Denmark informs, that shippers who have specific ideas for new products are welcome to contact them.

Yes, it will as today be based on an automized fall back process.

No, there are no limitations set for the price. However, there will be internal guidelines, as today, for the BAM when trading in the yellow zone.

The BAM will trade the exact quantity so that the ASB will be traded back into the green zone, down to 1 MWh