This document discusses the future design of the EU gas market. It outlines the key elements of the European Commission's Clean Energy package and its potential impacts. These include measures that could increase gas demand and promote renewable gas production, as well as those that favor electricity for heating and mobility. The Commission is exploring how to "mirror" gas market regulations based on the electricity market design. A study will evaluate different gas market scenarios, such as trading regions and a single market with zero tariffs at interconnection points. Overall, the document considers the tradeoffs between different gas market models and the practical challenges of transitioning between models.

1. Future EU Gas Market
Design
Claude MANGIN, Head of EU Affairs

2. 2
The Clean Energy package published by
the Commission the 30th November 2016
The mirroring exercise
The Quo Vadis study on the Gas Market
Design
Which future EU legislations can impact
Eurasian gas supply strategies?
And how?

3. 3
The Commission’s legislative proposal is about :
o The recast of the electrical market directive and regulation
o A new regulation on the risk preparedness in the electricity
sector
o The revision of the directive of renewable energy
o The revision of the directives on energy efficiency and on
energy performance of buildings
o The recast of the regulation on ACER
o A new regulation on the governance of the Energy Union
o A Communication on eco-design working plan 2016-2019
o A Communication on clean energy innovation
o A Communication on connected transport
 Some measures could favour gas demand and renewable gas
production.
 Some items will promote electricity for heating and for mobility.
The Clean Energy package

4. 4
 The Commission is looking for measures from the Clean
Energy package which could be “copy/paste” to the gas
regulation and directive.
 We have not seen yet any proposal.
The mirroring exercise

5. 5
 Ernst & Young has been committed by the Commission.
 REKK’s European Gas Market Model will be used to evaluate
“EU social welfare”.
 A stakeholders’ workshop is planned for end of June.
 At least, the following scenarios will be studied :
o Gas trading regions
o Single European market due to a zero tariff at
Interconnection Points
The Quo Vadis study on gas market
regulatory framework

6. 6
 Gas lake?
 Most liquid hub
in Europe + transmission
cost, like the US model?
 The last annual report of ACER on the gas wholesale
markets may give a misleading snapshot.
http://www.acer.europa.eu/Events/ACER-Workshop-on-Market-Monitoring-Wholesale-Electricity-and-
Gas/Documents/Gas%20Wholesale%20MMR%20presentation%20Workshop%20-%2021%20September.pdf
Which model for EU Gas Market?

7. 7

8. 8
 Long-term booking of capacity is decreasing.
 Spread between adjacent balancing zones may increase
again?
 Based on the just published network code on tariff, cost reflective
tariffs which minimise cross-subsidies between network users
seem to be favoured.
 However, the gas lake model will be investigated in the Quo Vadis
study.
 The main issue of putting IP’s tariff at zero will be the needed shift
of power from national level to the European level.
 For TSOs, it means redistribution of revenues.
Gas lake versus
leading hub + transmission cost ?

9. 9
Switching from one model to the other leads to some new
issues :
Will capacity still be auctioned simultaneously in whole
EU on booking platforms with a zero reserve price?
o Will Congestion Management Procedures still be
efficient to prevent hoarding?
TSOs would have to cope with new and changing flow
patterns. To deal with this, TSOs would :
o invest in new infrastructures
o and/or reduce the level of offered capacities.
How will the interconnectors between UK and
Continental Europe and Ireland be considered after
Brexit?
o As entries points to EU with an increased tariffs?
Some practical issues of changing model

10. 10
 Maximise the social welfare. Can be argued :
o For who?
o Not only measured by the wholesale price spread between
markets.
 In the Gas Market Design discussion, the future role of gas
should be tackled/promoted because :
o It is the cleanest fossil fuel which allows quick CO2 reduction,
for instance in production of electricity and in mobility
(Compressed Natural Gas and LNG for vehicles).
o Renewables gases (biomethane,
synthetic methane produced from
Power-to-Gas units) will use existing gas
assets whereas, at some point,
renewable electricity could need new
power lines.
o It would be very difficult for the power
grid to replace the large gas capacity
needed for heating.
What for ?