What is it about?
The EU Agency for the Cooperation of Energy Regulators (ACER) found a halving of gas contractual congestion in the EU transmission networks according to its 8th specialised report on the subject published today. 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 (CMPs) to access the gas market.
Has COVID-19 effected gas capacity auctions?
In 2020, the occurrences of auction premia, which arise when requests for capacity exceed the offer, dropped by 70% compared to 2019. COVID-related uncertainty as well as general demand and supply dynamics may affect whether auction premia will return in 2021 or remain scarce at around 0.6% of all auctions in scope of the analysis.
How much congestion?
In 2020, congestion has halved compared to previous years with 19 Interconnection Point (IP) exit and entry sides in 2020 compared to 37 exits and entries in 2019). Half of the congestion is due to auction premia, which occurred in the auctions of yearly and quarterly capacity products. The other half is due to the lack of offer of any capacity products with a duration of one month or longer.
Has any progress been registered?
While the number of congested IP sides is low, local contractual congestion can be severe and reduce market efficiency. Around 85% of the congested IP sides in 2020 were also congested in the past.
What comes next?
Transmission System Operators ('TSOs') can apply a number of 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 despite its decreased use in 2020; that decrease is partly compensated by an increased use of Firm Day-Ahead Use-It-Or-Lose-It and Surrender as CMP measures.
More than 60% 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 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 report has suggestions for further research and ACER calls on researchers to use the substantial amount of available data to study different aspects of congestion in EU gas markets.