Oil & Gas

ACER Finds Growing Contractual Congestion in European Gas Transmission Network

The European Union Agency for the Cooperation of Energy Regulators (ACER) published on May 20 the 7th edition of its Report on “contractual congestion in EU gas markets and how it is managed”. Contractual congestion may signal a reduction of market efficiency. It happens when some network users were not able to obtain the capacity product of their choice and had to rely on congestion-mitigating measures to access the gas market. Transmission System Operators, for instance, can apply a number of congestion management procedures (‘CMPs’) to improve market efficiency.

In 2019, congestion was detected at 37 entry and exit sides across Europe, which is around 10% of all Interconnection Points (‘IPs’) in the EU. EU rules foresee that the Firm-Day-Ahead Use-It-Or-Lose-It mechanism has to be applied at these congested IP sides, unless congestion is unlikely to recur in the next years. The Report further finds that the Oversubscription mechanism remains the most used CMP in 2019, whereas the use of other CMPs dropped significantly.

The Report also shares suggestions for further research and calls on researchers to continue studying different aspects of congestion in the EU gas markets.

 

Main findings

How much congestion?

In 2019, congestion has increased compared to previous years (37 IP sides in 2019 compared to 31 IP sides in 2018). Most congestion is due to auction premia, which primarily occurred in the auctions of quarterly capacity products.

 

Has any progress been registered?

While the number of congested IP sides remains relatively low, local contractual congestion can be severe and reduce market efficiency.

About 40% of congested IP sides in 2019 have been found congested before. Much less capacity was made available via secondary capacity trading and or as interruptible capacity at congested IP sides than the amount of capacity that has been unsuccessfully requested by network users in primary auctions of firm capacity products.

 

What comes next?

Transmission System Operators (‘TSOs’) can apply a number of congestion management procedures (‘CMPs’) to ensure network users can access the network even when they could not obtain some capacity products in the primary capacity auctions. The Oversubscription mechanism remains the most applied CMP, whereas capacities made available via FDA UIOLI and Surrender mechanisms dropped significantly.

About half of the congested IP sides are already covered by the FDA UIOLI mechanism, while for the other half the respective National Regulatory Authorities (NRAs) need to take action in line with the European Commission’s rules on congestion.

 

ACER’s main recommendations to the European Commission and to ENTSOG/TSOs

  • The EC may revise the CMP Guidelines to enhance the effectiveness of the measures.
  • ENTSOG and TSOs should continue improving data reliability to ensure the accuracy of information available at the ENTSOG Transparency Platform.

 

ACER’s call on researchers

The Congestion Report has a narrow scope of analysis, while a substantial amount of congestion data is available for deeper and broader analysis. The Agency shares suggestions for further research and calls on researchers to use the substantial amount of available data to study different aspects of congestion in EU gas markets.

ACER offers paid traineeship combining the onsite work experience and the possibility of contributing to the research on congestion, together with agency’s experts.

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