European and Danish gas markets

2.4.1 Europe

The market situation in Europe is still characterised by primarily national mar-kets with national spot trading, but with significant and increasing cross-border trading binding these together and cre-ating an often pronounced correlation between them. A proper and coherent spot market for gas in Europe is yet to be established. One reason for the lack of cross-border spot trading is general ca-pacity shortages, especially at the border points, a lack of interoperability between the different national systems and as yet highly limited spot trading in several countries, including Denmark.

Most of the European countries are net importers of gas. Imports come primari-ly from Russia, Norway, Tunisia, Algeria and Morocco. A growing proportion of imports is LNG-based¹², but most of the gas reaches the European markets via

12 Liquefied Natural Gas, cooled down to approximately -163° Cand imported by ship.

pipelines. Domestic production is falling throughout Europe, while consumption and thus imports are on the rise and are expected to continue rising over the coming years. By 2030, the European Commission expects 80% of the EU’s gas consumption to be covered by imports. Today, imports account for just over 50% of consumption, with approxi-mately half of the gas imports coming from Russia and one-third from Norway.

Biogas plays a small yet increasing role in quite a few EU member states, but has still to reach an extent which seriously affects security of supply.

The dependence on large supplies from one source through a number of countries gives rise to growing concerns that technical, commercial and political problems and disagreements will lead to situations with gas shortages in Europe and thus reduced security of supply.

The gas crisis in 2008 between Ukraine and Russia highlighted the risk of being dependent on Russian gas supplied via Ukraine, and it meant, among other things, that the European Commission accelerated the preparation of a security of supply regulation. See section 1.4.

A number of major infrastructure projects are currently being planned

which are aimed at bringing more gas to Europe. New pipelines are thus be-ing planned for example between north-ern Europe and Russia (North Stream) and between southern Europe and Rus-sia/Caucasus (South Stream), the Mid-dle East (Nabucco) and North Africa, re-spectively. Moreover, a number of LNG port facilities are being planned and de-signed in both southern and northern Europe.

At European level, work is taking place to strengthen compatibility between the systems in the individual countries. The aim is to increase the scope for exchang-ing gas between regional hubs and to solve the problems of cross-border interoperability. See section 1.1.

2.4.2 Denmark

The Danish gas market was fully liber-alised in January 2004 to allow all con-sumers a free choice of gas supplier.

Energinet.dk’s role is to ensure an efficient and flexible gas market. This means, for instance, that Energinet.dk develops products and facilities that can be used by commercial players for gas trading.

Gas market wholesalers (shippers) can:

• Conclude daily, weekly, monthly and annual contracts for transport capacity

38

• Trade gas on the gas exchange in Denmark, Nord Pool Gas. Here, shippers can trade anonymously as the gas exchange is the counterparty in all trades

• Conclude monthly balancing service agreements (right to imbalances between the within-day supplies and offtake)

• Order capacity and balancing services and keep abreast of own orders online via Energinet.dk’s self-service portal

• Trade gas, capacity and balancing services bilaterally with each other via Energinet.dk’s ownership transfer facilities: Gas Transfer Facility, Capacity Transfer Facility and Balance Transfer Facility. Shippers can meet and trade bilaterally via the electronic bulletin board.

In 2010, Energinet.dk introduced two major changes to the market model.

The first major change was the intro-duction of the virtual cross-border point Link4Hubs, which is described in sec-tion 1.2.

The second major change was the introduction of a so-called BNG entry point. BNG, which is the abbreviation of bio natural gas, is described in further detail in section 1.7.

The market model for the Danish transmission system (the wholesale market) is designed as an entry-exit model, see Figure 2-2.

The market model consists of:

• Three entry points in Nybro, Ellund and Dragør where the gas enters Denmark commercially

• An exit zone where Danish consumers are supplied with gas by the gas suppliers via the distribution network.

The exit zone is made up of four distribution areas, each with its own distribution company. The exit zone also has three large power stations (Avedøre 2, H.C. Ørsted Power Station and Skærbæk Power Station), which are directly connected to the transmis-sion network. In addition, the distribu-tion companies and Energinet.dk have designed the market model to also enable commercial biogas trading from the distribution systems to the transmission system when the first biogas producer is connected to one of the distribution systems

• Three transit exit points in Nybro, Ellund and Dragør, where natural gas can be exported from Denmark

• Two virtual gas trading points, the bilaterally agreement-based Gas Transfer Facility (GTF) and the multilat-eral gas exchange Nord Pool Gas

Transfer Facility (NPTF) where shippers can trade natural gas with each other

• A virtual BNG entry point where (bio) gas is delivered virtually from the exit zone to the transmission network

• A virtual cross-border point – Link4Hubs

• Two physical storage points, ie the storage facilities in Stenlille and Lille Torup. Here, shippers that have purchased storage capacity can inject gas into and withdraw gas from the facilities.

A number of gas suppliers operate in the retail market from among which all gas consumers in Denmark have been able to choose freely since 1 January 2004.

The number of changes of gas supplier is still not overwhelming, and it is in particular major gas consumers that have changed supplier, especially electricity and heating generators as well as major industrial consumers.

In 2009, 3.2% of consumers with consumption corresponding to approxi-mately 15% of the total volume thus changed gas supplier. In 2008, however, only approximately 0.5% of consumers changed supplier, but this represented a volume of around 17%. This may indicate that more small customers are changing supplier today than before.

Figure 2-2: Market model for the transmission system.

Exit zone Denmark

entry pointBNG

Dragør

Ellund Nybro

Virtual points

GTF

NPTF

L4H

2 storage points

39

40