Energy regulator Bnetza has approved a modified version of the German system operators' gas capacity overbooking and buy-back model that will enter into force from 1 October 2021 and continue through to September 2024.
The overbooking mechanism will be combined with market-based measures and is designed to help alleviate issues arising from an expected 78pc drop in available firm, freely allocable entry capacity into the German grid that is anticipated following the NCG-Gaspool market merger, scheduled for 1 October 2021. NCG and Gaspool will be integrated into a single hub, which will be called Trading Hub Europe.
By means of the overbooking mechanism and other measures, system operators would offer firm capacity in excess of available technical capacity. When nominated flows exceed available technical capacity, operators would rely on these tools to alleviate congestion or, ultimately, have to buy back capacity from shippers.
Additional capacity provided through these mechanisms will be available at the auction for annual capacity scheduled for 6 July.
For the 2024-25 gas year and onwards, the sufficient amount of firm, freely allocable capacity determined up to that point will be offered to Trading Hub Europe, Bnetza said. Market behaviour following the merger will help identify this required capacity, and it will be included in Germany's network development plan for 2024-34.
Approved proposal changes
Bnetza approved a number of changes to system operators association FNB's initial proposal following consultations with market participants.
Changes made to FNB's proposal were largely in line with those in a draft approval published earlier this year.
A price cap on the use of market-based instruments and for buying back capacity using the overbooking system was removed. The cap had been a target of heavy criticism during the proposal's consultation phase.
An upper price limit is not necessary and would not be appropriate, Bnetza said. There were doubts about its legality, but regardless, such a cap is not necessary to adequately take into account the cost risk of the relevant measures, the regulator said.
But there remains a "minor residual risk" of potential abuse of the system without a cap, a possibility that FNB will keep a close eye on, the group had said.
Bnetza also adjusted FNB's proposal to automatically suspend day-ahead and within-day capacity in the event of congestion, requiring the use of capacity buy-back. Instead, suspension of these capacities will only happen in cases in which it would be the only way to avoid endangering the security or reliability of the gas supply system, the regulator said.
The relevant transmission system operators will be responsible for assessing the specific situation to determine whether other market measures, including a restriction to shippers' renominations, are insufficient, and a suspension of marketing is required.
Bnetza will also allow operators to offer capacity for the upcoming two gas years at auctions for annual capacity over the test period, up from the single, upcoming gas year envisioned in FNB's proposal.
Technical and additional capacity will be marketed together for the 2021-22 and 2022-23 gas years at the July auction, and then again on 7 May 2021. Capacity for the 2022-23 and 2023-24 gas years will be auctioned in July 2022, and remaining capacity for the 2023-24 gas year in March 2023. Additional capacity can be offered at any high-calorie entry points, including those connecting storage sites with the grid.
Germany's system operators have to inform Bnetza by 1 May each year of the amount and type of additional capacity that they plan to offer at the upcoming annual Prisma auction.
The system operators are also required to provide a detailed report at the start of each December, starting from 2022, on the use of market-based instruments or the capacity buy-back system.
Bnetza classified the expected costs of its proposed gas capacity overbooking model as "volatile" in a separate ruling, which would include them within the set of costs system operators are responsible for reducing throughout a regulatory period.
