Poul Jacobsen Energinet, Signe Rasmussen Energinet & GeirSjöholmNordionEnergi

USER GROUP ON EVALUATION OF THE JOINT BALANCING ZONE

26 March 2021, From 10:00 to 12:00

26/3-2021

User Group on JBZ 1

Poul Jacobsen Energinet, Signe Rasmussen Energinet &

Geir Sjöholm Nordion Energi

MUTE YOUR MICROPHONE,

WHEN YOU DON’T SPEAK SWITCH ON YOUR CAMERA, ONLY WHEN YOU ARE GIVEN THE

WORD TO SPEAK

…YOU CAN ALSO WRITE YOUR QUESTION USING THE CHAT -

THE HOST WILL ASK THE QUESTION FOR YOU USE THE ‘RAISE HAND’

FUNCTION IF YOU WISH TO COMMENT OR ASK A

QUESTION…

EVALUATION OF JOINT BALANCING ZONE

We are interested in your opinion on JBZ:

- What is your experience with JBZ?

The regulator also expects an analysis of JBZ:

Decisions by regulators can be found here:

https://forsyningstilsynet.dk/gas/afgoerelser/forsyningstilsynet-metodegodkender- joint-balancing-zone-jbz-en-faelles-balanceringsmodel-for-danmark-og-sverige

26 March 2021

JBZ – Evaluation – User Group 4

AGENDA

• Why JBZ?

• JBZ Objectives

• What have been the market effects?

• Shipper experiences

• What is your experience after 2 years of operation?

Evaluation of JBZ after 2 years of operation

WHY JBZ?

What was the regulatory framework?

What was the reason behind creating JBZ?

• ACER sets the guidance

• Independent body to foster the integration and

completion of the European Internal Energy Market for electricity and natural gas .

• Gas Targe Model

• 2011

• 2015 Updated

• In 2017 Swedish and Danish regulators preformed a

European Gas Target Model Self-Evaluation report

REGULATORY FRAMEWORK

https://www.acer.europa.eu/en/Gas/Gas-Target-Model/Pages/Main.aspx

ACER PUBLICATION 2015

”GAS MARKET VISION”

• It is crucial that the right structural framework exists to allow functioning gas markets to emerge.

• The European gas market will consist of interconnected entry-exit zones with virtual trading points …, with the size of each zone being as large as the existing infrastructure allows.

• As a general rule, entry-exit zones should not be defined on the basis of national boundaries, but based on physical realities and market needs.

https://www.acer.europa.eu/Events/Presentation-of-ACER-Gas-Target-Model- /Documents/European%20Gas%20Target%20Model%20Review%20and%20Update.pdf

WHY JBZ?

• Sweden had derogation from the EU network code on balancing (NC BAL) until 1 April 2019

• New balancing system was therefore needed

• Pragmatic solution was to create the JBZ between Sweden and Denmark

• Balancing one system rather than two systems

• Larger system is a benefit for both Sweden and Denmark

• Also in line with the Gas Target Model

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JBZ – Evaluation – User Group 8

Why April 2019?

OBJECTIVES JBZ

What were the objectives of JBZ?

Have the they been fulfilled?

OBJECTIVES JBZ

What were the objectives of JBZ?

Have the they been fulfilled?

1. Increase liquidity at the gas exchange (ETF)

2. Increase transparency by

introducing a separate balancing charge

3. Simplify daily capacity optimisation 4. More balancing responsible in

Sweden

5. Increased SoS – via a higher pressure in the Swedegas gas system

# 1 ETF DEVELOPMENT IN LIQUIDITY

26 March 2021 11

What has happened with the liquidity at ETF (kWh/h)

- 1.000.000 2.000.000 3.000.000 4.000.000 5.000.000 6.000.000 7.000.000

01-04-2017 11-05-2017 20-06-2017 30-07-2017 08-09-2017 18-10-2017 27-11-2017 06-01-2018 15-02-2018 27-03-2018 06-05-2018 15-06-2018 25-07-2018 03-09-2018 13-10-2018 22-11-2018 01-01-2019 10-02-2019 22-03-2019 01-05-2019 10-06-2019 20-07-2019 29-08-2019 08-10-2019 17-11-2019 27-12-2019 05-02-2020 16-03-2020 25-04-2020 04-06-2020 14-07-2020 23-08-2020 02-10-2020 11-11-2020 21-12-2020 30-01-2021 ETF

Warm winter

Cold winter Start of Tyra

redevelopment

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JBZ – Evaluation – User Group 12

# 1 ETF DEVELOPMENT

• Liquidity at ETF has increased since the introduction of the balancing model in 2014

• This was expected to continue after JBZ

• Economist like to say: “Ceteris paribus” or “all other things being equal”

• But, all other things have – not – been equal:

• Tyra redevelopment has significantly changed the gas flows and by this also the commercial

dynamics – resulted in reduced volumes on ETF

• Warm winter 2019/20 reduced the volumes

• Cold winter 2020/21 increased the volumes

Expected an increase in ETF volumes Why has there been a decrease in ETF?

795.024.394

1.043.068.410

644.318.921

565.424.585

April 2017 -

March 2018 April 2020 -

March 2021 April 2018 -

March 2019 April 2019 - March 2020

Ø 761.959.078

Full data for the month of March 2021 not included yet

After JBZ Before JBZ

Volumes traded on ETF 1 April 2019

# 2 BALANCING

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Two set of numbers on balancing

• Is to cover the indirect balancing costs, which are the costs necessary to establish a system that enables the TSO to follow the individual shippers/BAs balance in JBZ.

• Covers the cost of operating the commercial balancing (IT and people)

• A separate balancing charge that was split from the commodity charge

• Introduced to increase transparency

Commercial Balancing

• Keep a separate account for energy balance trades

• Cost neutral: There shall be no profit or loss from this trade over time

• Included is e.g.:

• Cash-out (end of day)

• Yellow zone trades

# 2 BALANCING CHARGE

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JBZ – Evaluation – User Group 14

Inspired by Swedegas - introduced to increase transparency

A volume charge, to cover the fixed costs, of operating the balancing market

Balancing charge in DKK/kWh Balancing Charge, total revenue M DKK

0,0002

0,00016

0,00019

Oct. 2019

Apr. 2019 Oct. 2020

4,3

5,7

6,3

9 months2019 2020

12 months 2021 Budget 6,3 6,3 Ø 6

-5

2

-6 -5 -4 -3 -2 -1 0 1 2 3 4

-6 -5 -4 -3 -2 -1 0 1 2 3 4

Jul.

Jun. 2020

2019 Apr.

Apr. 2020 2019 May.

2019 Nov.

Jul. 2019 2019 Aug.

2019 Sep.

2019 Oct.

2019 Dec.

2019 Jan.

2020 Feb.

2020 Mar.

2020 May.

2020 Aug.

Jun. 2020

2020 Sep.

2020 Oct.

2020 Nov.

2020 Dec.

2020 Jan.

2021

# 2 COMMERCIAL BALANCING - COST NEUTRAL

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JBZ – Evaluation – User Group 15

Monthly and accumulated results (MDKK)

Negative number in the beginning accumulated to over -5 MDKK but have been recovered

# 3 CAPACITY PRODUCTS

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JBZ – Evaluation – User Group 16

Shippers can optimise their capacity products via the products in the figure JBZ also gave increased flexibility to the Swedish market

• Creating a Virtual Exit Zone (VEZ) meant:

• Overrun charges (automatic delivery of capacity allocations, when needed)

• Flexible deadlines for booking capacities

• New: Pooling of capacities for gas used in Sweden and Denmark

• If the Overrun Charge is used, then this should lead to a reduction in Day capacity

1,0 1,1

1,2 1,4 1,4 1,4 Month

Year Quarter

Day Within day Overrun Charge

# 3 DAY CAPACITY - RESERVED

0 200000 400000 600000 800000 1000000 1200000 1400000

01-01-2018 19-01-2018 06-02-2018 24-02-2018 14-03-2018 01-04-2018 19-04-2018 07-05-2018 26-05-2018 20-06-2018 30-07-2018 19-08-2018 08-09-2018 28-09-2018 20-10-2018 08-11-2018 26-11-2018 14-12-2018 01-01-2019 19-01-2019 06-02-2019 02-03-2019 20-03-2019 07-04-2019 27-04-2019 16-05-2019 11-06-2019 17-07-2019 06-09-2019 01-10-2019 20-10-2019 12-11-2019 30-11-2019 05-02-2020 03-03-2020 04-04-2020 25-04-2020 20-05-2020 24-06-2020 27-07-2020 21-08-2020 10-09-2020 30-09-2020 22-10-2020 09-11-2020 27-11-2020 15-12-2020 04-01-2021 22-01-2021 09-02-2021

Day capacity (kWh/h)

Dragør exit - Reserved Capacity day kWh/h Joint Exit Zone exit - Reserved Capacity day kWh/h

26 March 2021 17

Significant fall in demand for daily capacity in Sweden, after JEZ

Overrun charge (daily product) was introduced to Swedish market together with JBZ

JBZ introduced 1 April 2019

JEZ, yellow line (both SE and DK) Green line only for

Dragør (SE)

# 3 WITHIN DAY CAPACITY - RESERVED

0 100000 200000 300000 400000 500000 600000

06-01-2018 15-01-2018 22-01-2018 28-01-2018 01-02-2018 06-02-2018 11-02-2018 15-02-2018 21-02-2018 25-02-2018 01-03-2018 07-03-2018 11-03-2018 15-03-2018 23-03-2018 28-03-2018 01-04-2018 06-04-2018 14-05-2018 12-08-2018 16-08-2018 02-10-2018 26-10-2018 19-11-2018 26-11-2018 05-12-2018 13-12-2018 17-12-2018 22-12-2018 04-01-2019 18-01-2019 27-01-2019 09-02-2019 03-03-2019 19-03-2019 08-09-2018 03-04-2019 12-04-2019 19-04-2019 16-05-2019 10-06-2019 01-10-2019 27-10-2019 30-03-2020

Within day capacity (kWh/h)

Dragør exit, within day - Reserved Capacity within day kWh/h Joint Exit Zone, within day - Reserved Capacity within day kWh/h

26 March 2021 18

Fall in demand for within daily capacity in Sweden, after JBZ

Overrun charge (daily product) was introduced to Swedish market together with JBZ

JBZ introduced 1 April 2019 Days with capacity bookings: 139 ; 37

# 4 BALANCING RESPONSIBLE IN SWEDEN

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JBZ – Evaluation – User Group 19

Number of balancing responsible has increased in Sweden after the introduction of JBZ

• It was expected that the suppliers in

Sweden would get access to more Balance Administrators

• The number of Balance Administrators has increased in Sweden

• One new in 2019

• Two new in 2020

5

6

8

2019 JBZ

2019 2020

# 5 INCREASED SECURITY OF SUPPLY

26 March 2021 20

Opening the valve in Dragør creates a higher pressure in Sweden

The figure shows the increase in the average pressure in the Swedish system

2019

SHIPPER EXPERIENCES

Comments?

What is the positive?

What is the negative?

SHIPPER EXPERIENCES

Comments?

What is the positive?

What is the negative?

Raise hand, chat (or email until 14 April 2021)

• …

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