Transcript Shipper Task Force on balancing – second meeting

User Group on balancing
12 December 2013
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Agenda
• Process and timeline
1.
Physical vs. commercial balance
• Short introduction to the topic
• Shipper Task Force view
• Energinet.dks expected solution
2.
Cash out vs. linepack flexibility for end-of-day settlement
• Initial comments by Energinet.dk
• Shipper task force view
• Comments from 2 shippers
3.
Within-day data
• Shipper Task Force view
4.
Trading and liquidity
• Shipper task force view
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Process and timeline balancing
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Involving different market stakeholders
Market
Market involvement
DSO
DSO cooporation 1.
DERA
DERA dialogue
ENDK
Analysis
1.5.2013
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1.10.2013
The different
topics will be
discussed in one
step
DSO coop. -3.
DSO co-oporation – 2.
Implementation step 1
1.1. 2014
1.10.2014
Implement.
step 2
1.10.2015
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STF on balancing - timeline
28 Nov.

12 Dec.
5 or 6 Dec.
1st meeting

2nd meeting

Early Jan.
User Group

(possible) 2nd meeting
January 2014
Market
recommendation
- balancing
”Homework”
Prepare UG
Possible
market
consulation
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Physical vs. commercial
balance
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Basic model inspiration
Upper TSO reaction zone
Optimal system balance
Basic model consists of:
• A green tolerance zone, where the commercial balance is
Lower TSO reaction zone
allowed
• An optimal point where the commercial system is in perfect
balace
Gasday down to a
• Limits of the green zone can be fixed or updated
day-to-day basis
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Basic model – forecast on daily balance
SCB (start position/EOD position)
SCB (expected EOD position)
TSO reacts
within the gas
day (trade)
Upper TSO reaction zone
Optimal system balance
Shipper
renominaton
(based on trade)
Lower TSO reaction zone
SCB: System Commercial Balance
• Expected balance position of total commercial system (all
shippers) End-Of-Day (EOD)
• Calculated every hour through the gas day
Gasday
• Changes based on renominations
• TSO reachts within-day when forecast EOD is out of green
zone (trade -> market renomination 2 hours later)
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Shipper Task Force view on calculating the green
zone (minutes from first meeting)
The STF said that they prefer an announced green zone which is based on the
physics (maybe with a fix for weekends and holidays).
The arguments are:
• Even though Energinet.dk has announced a monthly or one with a longer
duration, Energinet.dk will still have to change it in special circumstances
• Therefore all shippers would need to every day to be aware of the zone.
• However, it may be best with a fix zone for weekends and holidays to help
small shippers, so they do not need to be aware of possible changes.
• The green zone should be based on the physics because it will sometimes give
more flexibility to shippers and sometime less, but it is better to get more
flexibility instead of getting an averaged zone.
• This means that the band in some circumstances could change within-day,
which shippers would need to be aware of.
• This circumstance was all right for STF.
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STF view on calculating the SCB
The STF argued that they want the SCB to be based on the physics (going from
a SCB model to a Total System Balance model; TSB).
Moreover, the STF does not want fees on how correct their nominations are
compare to the actual take during the day. Instead STF suggested Energinet.dk
should make use of external forecast (not only based on nominations).
The arguments are:
• Nominations are too weak a “forecast” for balancing purposes for three
reasons:
• Shippers will always try to do their best when nominating, but nominations
are often not correct mostly due to differences in expected offtake in the
Exitzone
• If shippers are not paying proper attention to their nominations, it could
cause unnecessary action in the market by Energinet.dk
• If shippers are not deliberately nominating incorrect, they could be accused
of manipulating the market
• By using the physics, Energinet.dk will not have to rely on potentially
Dato
“incorrect” nominations, and will not have to incentivize nominations.
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Since the Shipper Task Force meeting…
Energinet.dk has closely investigated the effect of bringing the physical and
commercial balance close together…
…meaning that shippers would act in the true physical world where within-day
changes in • Compressor operation (need for different amount of cushion gas)
• Usage of OBAs at border points and storages
- will effect the overall balance situation, and thereby also how shippers should
react…
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Findings from investigation - 1
Flexibility:
• The total daily flexibility (the seize of the green zone) would not change
within-day…
• …but the “placement” of the green zone in relation to the linepack position
could change…
• = no extra flexibility & less stability
Green zone reaction:
• In the commercial system, shippers are helpers and causers, and causers
have incentives to renominate and “pull” the balance away from the yellow
zone, before it is actually reached.
• In the physical system, the system itself can be ”causer”, and if shippers are
perfectly balanced, who will help the balance away from the yellow zone?
• Could ultimately mean less flexibility in the physical model than in the
commercial model, to compensate for lack of reaction in green zone
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Findings from investigation - 2
Mismatch between operation and market reaction
• there could occur situations where the market disposition would require a
scenario change, which could change the position of the green zone (changed
need for cushion gas)
• This could change the disposition of the market, which again could require
changing the scenario back again, which again would change the market
disposition
Energinet.dk sees that moving the physical and commercial balance too
close together would not be beneficial for neither the operation of the
system, nor the market
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Possible solution
Based on these findings, and to meet the market as far as possible,
Energinet.dk suggests a semi-physical model, where:
• Energinet.dk sets the limits (green/yellow zones) down to a day-ahead
basis based on physical flexibility
• These limits are fixed within the gas day, and can only be changed in very
special circumstances (eg. Early Warning)
• Energinet.dk will investigate the possibility to use forecasts in stead of
nominations, to calculate the System Commercial Balance (SCB) withinday
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Cash-out vs. linepack flexibility
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End-of-day settlement models
Cash-out
Cash-out & local
LFS
Global LFS
• Shippers’
imbalance EOD
is fully cashed
out
• The cash-out
also affects the
commercial
position = SCB
goes to zero
• Shippers start
from zero every
day
• (BEL – daily)
• Same as cashout model, but
shippers can buy
flexibility
(balance margin)
as an insurance
• Gives shippers a
tolerance margin
where
imbalances are
not cashed-out
• (DK – H/C)
• No cash-out EOD
• Shippers keep
their balance
position from
day-to-day
• No imbalance
charge
• Shippers pay a
charge, based on
their balance
position from
zero
• (NL - daily)
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Initial comments by Energinet.dk
• It should be noticed that a linepack flexibility model would be different in
Denmark than in the Netherlands:
• In the Netherlands there is an hourly balance, in Denmark it is daily
• In the Netherlands, the helper/causer function is applied within-day to the
specific hour, and the linepack flexibility tariff is very close to the market
price
• In Denmark the helper/causer function would have to be applied in the
linepack flexibility tariff (trades are allocated to linepack tariff),as there are
no within-day function
• Thus, the price for the linepack flexibility service = price for cash-out
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Comment by Shipper 1
• First of all, we prefer the LFS model and no cash out. This is also in line with
the flex model presented Thursday as the balance is continuous forwardlooking and therefore no reason to have a specific deadline at 6 am. In
addition, this would limit the need for within-day trading for shippers during
night compared to the cash-out model as there is no fee for being out of
balance. Also to the benefit of small players.
• By using the linepack flex model in the calculations of imbalances the need for
forcing shippers to a zero balance can also be reduced.
• Another comment regarding the limited with-in day liquidity at GTF: ENDK
could make use of the within-day capacity product at Ellund and thereby
sell/buy balancing gas at Gaspool/NCG and transport to Denmark.
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Comment by Shipper 2
• In general we favour a cash out model at the end of the day. Primarily this
preference comes from a belief that it will create a more stable system if it is
continuously brought to balance. In a Linepack Flex model we see some risk
that the imbalances can accumulate and create the need for balancing actions
on days where the market in general are very well balanced but shifts slightly
outside the “green band”.
• This preference is however based on the assumption that balancing will be
carried out at neutral prices without incentives for all market participants,
except on days where Energinet.dk actually carries out balancing actions. If
this is not the case we cannot give any indications as to preferences before a
more clear picture of suggested models have been presented.
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Within-day data
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STF view on within-day data
The STF wants more data than twice daily. The best solution will be each three
hours from 12 am to 12 pm (five times for 12 am, 3 pm, 6 pm, 9 pm, and 12
pm with 1:45 minutes lead time).
The arguments are:
• The first update at 12 am takes the first six hours into account. This is fine as
a first update, as it include the total morning peak
• Then it is critical to have an update up to the hours 8-9 pm, where the
evening peak is included.
• Thereby the shipper will still have a chance to react before night, and before
the shipper is too restricted in its hourly capacity
• Two-three extra updates are especially critical, if the dynamic green zone is
implemented. This will give the shippers the opportunity to go to the market
and buy the flexibility at a time where it is not as expensive as it will be late
at night (due to lack of liquidity).
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Trading & Liquidity
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STF view on trading & liquidity - 1
• The STF claimed that Energinet.dk should work towards having all trading at
one platform, being the gas exchange. The STF does not necessarily see the
need (and market) for a 24/7 gas exchange, but does see other possibilities:
• Shippers communicate prices on bids and offers on beforehand, which
Energinet.dk can “take”
• Energinet.dk sends out a message to the market that Energinet.dk needs
to buy or sell a certain amount at a certain time, where shippers can place
bids/offers. A kind of a warning system.
• Energinet.dk could design a middle step before full market balancing,
where Energinet.dk could use system operational storage outside normal
trading hours, which should be expensive for causer if activated.
• Energinet.dk gets inspiration from ELBAS (Nord Pool Spot’s intraday
trading system for the physical electricity market).
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STF view on trading & liquidity - 2
The arguments are:
• With a 24/7 exchange, there will be many hours with very low liquidity. This
could be partly solved by announcing certain trading slots outside of normal
trading hours on beforehand, as the market would know exactly when to bring
the liquidity to the exchange.
• Using an exchange gives the market full transparency on prices and amounts,
which are important to market players.
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