Managing congestion in the new German gas market area

How do you efficiently manage congestion within the new area? Which instruments should be available to manage such congestion? Our study for Initiative Erdgasspeicher e.V. (INES) examines the details, and answers key questions.

After many years of preparation, 1 October 2021 marks the merger of GASPOOL and NCG into a single Germany-wide gas market area (Trading Hub Europe, THE). As a result, shippers no longer have to consider the available transport capacity between the two formerly separate market areas in their transport bookings and can transport gas seemingly without bottlenecks throughout Germany. But the operation of the network remains subject to the same restrictions in network capacity as before, as the market area merger was carried out without network expansion.

The market area merger might therefore cause additional congestion in the gas network. This requires the use of additional instruments to manage congestion. The instruments that should be available to manage this congestion, however, lead to a controversial debate prior to the merger and were ultimately regulated by the Federal Network Agency in the "KAP+" ruling.

Our study goes beyond this specific debate. 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 right mix of congestion management instruments;
• The study recommends the design for an efficient dispatch of such congestion management instruments.

These principles are applied to the German market area merger of NCG and GASPOOL to derive an efficient instrument mix for the new German gas market area (THE). A comparison with the instruments approved by the Federal Network Agency in the "KAP+" procedure shows that by adapting the instruments more potential for congestion management could be exploited and more efficient congestion management would be possible. Click below to read our study in full.

Frontier regularly advised on market design in the gas sector. For more information please contact media@frontier-economics.com, or call +44 (0)20 7031 7000.