How do you efficiently manage congestion within gas market areas? Which instruments should be available to manage such congestion? Our study for Initiative Erdgasspeicher e.V. (INES) examines and answers these questions in detail.
Entry-exit systems in gas markets allow network users to freely exchange gas volumes within market areas. But the operation of the network remains subject to restrictions in network capacity – also within market areas. This conflict therefore requires the use of additional instruments to manage congestion. The instruments that should be available to manage this congestion, however, often lead to controversial debate – for example, in the context of the French and German market area mergers.
Our study goes beyond those specific debates. It offers universal insights and recommendations for an efficient mix of instruments:
- The study provides a comprehensive and systematic overview of potential instruments for congestion management within gas market areas.
- The study sets out universal economic principles, to guide national regulators when they are determining the mix of congestion management instruments.
- The study recommends the design for an efficient dispatch of such congestion management instruments.
As well as highlighting an efficient mix of instruments for the new German market area, THE, our study also reveals inefficiencies when network operators access congestion management sources, which can be competitively accessed by other market participants – e.g. the spatial bypass of bottlenecks through other grids. Instead, additional sources for congestion management should be used if their dispatch is cost efficient, for example the use of virtual gas storage to bypass a bottleneck. Click below to read our study in full.
Frontier regularly advised on market design in the gas sector. For more information please contact firstname.lastname@example.org, or call +44 (0)20 7031 7000.