Consultation: introducing a new trading window in the current balancing model
Energinet hereby gives market players the chance to comment on a suggestion to include a new trading window late in the gas day. The consultation is open until 2 March, whereafter the suggestion is forwarded to the Danish Utility Regulator (DUR) for approval.
In the past 6 months, the gas prices in Europe have increased drastically, due to the current supply/demand situation, and the global competition for gas. Not only has the general price level increased after the summer of 2021, but the market has also experienced a great degree of volatility, mainly due to the large uncertainty regarding deliveries from Russia. Thus, the EU gas market, including Denmark, have experienced the highest and most volatile gas prices since the gas market was liberalized almost 20 years ago, creating an entirely unusual market situation.
This market situation has had a large impact on the Danish/Swedish balancing zone. Not so much in terms of the physical balancing, but mainly in terms of the balancing economy for the Balancing Area Manager (BAM). Especially the large gas price volatility from day-to-day, combined with a large degree of flexibility in the green zone and knowledge of the imbalance price relatively early in the gas day, gives the market the possibility to speculate against the BAM.
It is the market players’ responsibility to balance their portfolio, in order for the BAM to minimize the need for balancing. Therefore speculation against the BAM is not tolerable.
To create the right incentives for the market players to balance their portfolio and to minimize the need for the BAM to take balancing actions, it is suggested to include a trading window in the current balancing model, from 02:05 to 02:15 CET. Thereby, the new trading window will be placed after the last within-day data update at 01:45, and in time for the market to be able to renominate for the last hour of the gas day.
This change is suggested due to the following reasons:
- There is a need to create a stronger signal to balance late in the gas day.
- A trading window late in the gas day will reduce the possibility to speculate, as there is a risk of setting a higher/lower price.
- In the past months we have registered that the market is active late in the gas day, where there is created renominations against the BAM. Thus, the worry that liquidity would be low at night is considered reduced.
- In the coming balancing model (from 1 October 2022), the BAM will be able to trade every hour throughout the gas day, which has not been subject to comments on worries of lack of liquidity in the market process.
If you have any comments to this suggestion, please forward these to firstname.lastname@example.org on latest 2 March. All comments will be shared with DUR in the following process.