Gas balancing rules: The Danish Utility Regulator consults the gas market
Gas prices in Denmark are historically low. This calls for a change in the pricing of adjustment step 2 and to the general calculation of the buy sell-price. Through this adjustment Energinet Gas TSO intends to prepare for lower or even negative gas prices.
Market consultation until 22 June 2020
The urgency of implementing the suggested measures, means that the changes are only consulted through the Danish Utility Regulator. They will consult the market until 22 June at 12:00 noon.
The Danish Utility Regulator has published the full document (in Danish, but with a short English abstract). Please follow this link to read the document and participate in the consultation.
Gas prices may decrease down to negative prices
Since December 2019 the price tendency in the European gas market has caused the gas prices to reach a historical low level, due to the current supply/demand situation. In Denmark, the gas prices have reached a level of between 4-6 EUR/MWh during the last weeks.
The market foresees that the price level could reach lower or even negative prices during the next months because of a continued high level of supply, low demand and relatively full storages for the season across the EU. The gas exchange EEX is preparing for the possibility to trade negative prices within the coming weeks.
In Denmark, this rises two issues:
- In case of gas prices very close to zero, the incentive to balance can become ineffective, especially at night, where the BAM has no possibility to trade
- In case of negative prices, the calculation of the incentive is mathematically incorrect, thus meaning that shippers are awarded for their imbalance.
Measures needed to supplement the gas balancing method
- In case of an unsatisfactory market behavior due to lack of incentives at low gas prices, the Balancing Area Manager (the BAM) is able to implement a minimum incentive payment from day to day, for the adjustment step 2 price, of between 0.1-0.5 EUR/MWh (and minus 0,1- minus 0,5 if prices are negative). Also, the minimum incentive payment can be further increased to between 0.5-2 EUR/MWh (and minus 0.5-minus 2 if prices are negative), in situations where the market situation requires a larger incentive, which the BAM must officially state towards the Danish Utility Regulator.
- An addition to the current calculation of the buy-sell price for balancing gas (step 1 and step 2), to secure that the current incentive structure is maintained in case of negative gas prices.