igu2009docswgcfinal00382

1、FIRST RESULTS OF THE INTEGRATED EUROPEAN GAS MARKET: ONE FOR ALL OR FAR FROM ONENico Keyaerts 1, Leonardo Meeus 2, William Dhaeseleer 1,*1. University of Leuven (K.U.Leuven) Energy Institute branch Applied Mechanics and Energy Conversion (TME), Celestijnenlaan 300A P.OBox 2421 B-3001 Heverlee Belgiu

2、m Name2. University of Leuven (K.U.Leuven) Energy Institute branch ESAT - ELECTA, Kasteelpark 10 P.O.Box 2445 B-3001 Heverlee Belgium* Corresponding author: Tel: +32 16 32 25 10; Fax: +32 16 32 29 85 Nico.Keyaertsmech.kuleuven.be, Leonardo.Meeuseui.eu, William.Dhaeseleermech.kuleuven.beKeywords: 1.

3、European gas markets; 2. market liberalisation; 3. market integration.1Background of European gas market integrationAfter a full decade of market integration of the EU natural gas markets, a concise but thoroughreview of the current state of the EU gas market(s) is needed. Although several aspects o

4、f the liberalisation process have been studied separately in mainly consultant reports commissioned by the European Commission or reports from national regulators, a condense overview of the EU gas market does not yet exist. The main question dealt with in this paper is what the current state of the

5、 EU natural gas market is and what the results of the market liberalisation and integration efforts have been so far. The paper is structured as follows: this first section sketches the background of the market reforms. Section 2 briefly summarises the aims and research questions of the paper, where

6、as section 3 covers the answers to the questions laid out in section 2. Section 4 takes a brief look at the on-going initiatives to complete the internal market. The conclusions/results are summarised in the final section of this paper.It has been more than 20 years since the Member States of the Eu

7、ropean Union (EU) decided to formally create an integrated EU common market for goods and services 1-2. In the early nineties, the European Commission expressed its intentions to include the traditionally monopolistic energy markets that had been dominated by vertically integrated energy companies i

8、nto this ambitious market integration programme, resulting in directives governing the creation of the internal electricity market and the internal gas market 3-4. Although the Commission claimed early successes were already achieved, a second legislative package, which fully replaced the first pack

9、age, was adopted in 2003 (directive) 5 and 2005 (regulation) 6. This second package was developed in the slipstream of the Lisbon targets that suggest a strategy to make the EU the most competitive economy in the world 27,31. In 2006 a Green Paper for a European energy strategy was presented 7. This

10、 energy strategy was built on three cornerstones: besides competitiveness of energy markets (cfr. Lisbon targets), sustainability of energy and security of supply were added as focal points of the EU energy policy. Sustainability and security are not specific subjects of this paper, which focuses on

11、 the creation of an integrated gas market. Nevertheless, a fully competitive gas market supports the two other policy goals (e.g. unreliable partners are penalised by the market and unsustainable business models are killed by the market).In response to the observations of the Commissions DG Competit

12、ion Energy Sector Inquiry 8, the Commission proposed a third energy package 9-10 in September 2007. This package will amend the second package upon its complete adoption by the European Parliament and the Council. So, three legislative packages were proposed by the Commission in less than a decade.

13、This frequent patching by the European Commission raises the question what the current state of the integration process of the EU gas markets is. In other words, how close is the European Commission to getting the holy grail of the competitive EU single gas market? In this paper the authors give a c

14、omprehensive overview of the current state of the European gas market based on the publicly available literature (national market studies, progress reports, academic reports, etc.) and own market observations. In other words, where does Europe stand with the gas market reforms, where does it come fr

15、om, and where is it going?2Aims of the paperThis paper summarises the first achievements of the integrated European gas market, based onpublicly available evidence gathered from sources such as the European Commissions Directorate General for Transport and Energy (DG TREN), the European Regulators G

16、roup for Electricity and Gas (ERGEG), Gas Infrastructure Europe1 (GIE). Hereto the authors look at the current state of the European gas market(s) from different perspectives.A first point of view discussed in this paper is the legal state of the integrated gas market: to what extent are the directi

17、ves (differently) implemented in the different Member States. The second directive 51 GIE consists of three subdivisions: Gas Transmission Europe (GTE), Gas Storage Europe (GSE) and Gas LNG Europe (GLE)1discusses a wide array of gas market matters, with a number of choices available to the Member St

18、ates. The differences in implementation between the Member States provide a first measure of the progress made towards an integrated single market for natural gas.Secondly, the market structure(s) of the European gas market(s) is looked at. Who are the market players? Is there still concentration in

19、 the competitive parts of the gas market? What is the role of storage and LNG (liquid natural gas)? Are the markets interconnected? In other words, is there a physical backbone to support market integration, and eventually the creation of a single European gas market?A third element to be discussed

20、is the market architecture. In this part of the paper the main characteristics of European gas markets are explained. What are the sources of gas, where does consumption take place, and to what extent is local flexibility available. Many national markets have rather limited amounts of flexibility av

21、ailable. Therefore, flexibility needs to be imported from neighbouring markets. However, bluntly stated, the majority of production is situated at large distances from the consumption areas (outside the European Union), which complicates the gas market. So, in this part of the paper the typical rela

22、tionships between the market participants are explored and explained using flow chart logic.A next part of the paper deals with market functioning. How does the reformed gas market perform? What is the level of national liquidity of European gas markets? What are the trade volumes? Are the markets t

23、ransparent? Do market players have access to good price indices? Does entry occur in the national markets? Are incumbents entering each others markets, or are there effectively new participants in the markets.Finally, the authors take a look at on-going market initiatives, especially the Gas Regiona

24、l Initiative. As the single gas market is not in sight for the moment, maybe creating regional or coupled markets might prove a valuable step on the way to the holy grail of an integrated European gas market.3Current state of the market reformsIn this section the current state of the market reforms

25、is evaluated and the first attained results of themarket integration are discussed.a. Legal implementationThis section discusses the straightforward legal state of the integrated gas market. In other words,have the Member States complied with the rules laid out in the second package and how differen

26、t are the national gas market legislations?Due to the nature of the used legalinstruments (regulations2 and directives3) the time scheduleconcerning the opening of the gas market was determined by the deadline for transposition of the seconddirective into national law: July 1, 2004. However, DG TREN

27、s 2005 benchmarking report notes that many Member States had been late with the full implementation of the directive 11. In 2006 the European Commission initiated infringement procedures against 17 Member States that had failed to respect the transposition deadline in order to ensure full energy mar

28、ket opening by 2007. By July 1, 2007, all Member States who had not received derogations4 had formally opened their gas markets.Yet, the DG TREN benchmarking report of 2008 noted that some aspects of the directive were not properly implemented in national law: e.g. the authority of the regulator or

29、the unbundling of competitive (e.g. gas supply) and non-competitive (e.g. gas transport) activities 12. Moreover, the ERGEG monitoring report of 2007 13 concluded that in general the transparency requirements of the gas Regulation had not been properly implemented in the field. The problems identifi

30、ed in the different benchmarking and monitoring reports, and the conclusions of the Energy Sector Inquiry 8 inspired the Commission to propose a third legislative package.Below two major aspects of the European energy legislation are subject of a closer examination: “unbundling” and “third party acc

31、ess”. The former is an example of a legislative rule which is implemented in the Member States, but does not produce the expected results as far as market liberalisation is concerned; whereas the latter is an illustration of divergent national choices, directly following from the fact that European

32、directives only serve as a general framework in which the national authorities can still make own choices.i. UnbundlingUnbundling in the gas directive means that the transport and distribution functions, which are monopolistic by nature, cannot be controlled by market players who are active in the c

33、ompetitive parts of the gas business. Otherwise the controlling party could hinder access to the networks, or charge excessive2 A regulation lays down Community law that is directly applicable in all Member States without any national approval procedures.3 A directive needs to be transposed into nat

34、ional law before the agreed rules become applicable in a particular Member State; a directive usually provides framework for national legislation with a lot of room to maneuver for the Member States.4 Latvia, Lithuania and Portugal received derogation until 2010. Finland has derogation because its g

35、as grid is not interconnected with the main European grid. Cyprus and Malta currently have no gas market.2tariffs for the use of the network, which would just result in a transfer of profits within the controlling integrated company, but put the competitors at a serious disadvantage.Art. 9 of the se

36、cond directive stipulates: “it transmission system operator shall be independent at least in terms of its legal form, organisation and decision making from other activities not relating to transmission”. So, the system operator should be a separate legal entity with separate business logic. Accordin

37、g to the same article the ownership could stay with the vertically integrated company. Table 1 lists the evolution of TSO unbundling in the different Member States between 2004 and 2008. Four degrees of unbundling are distinguished: unbundling of accounts (the business unit responsible for transport

38、 services keeps its own accounting books), management unbundling (a separate management team is responsible for transportation services), legal unbundling (a separate legal company is created for delivering transportation services), and ownership unbundling (the former vertically integrated company

39、divests its transportation activities). A fifth category lists the countries that have either received derogation (Finland) or have no gas market (Cyprus and Malta).Table 1 TSO Unbundling: country status 14-16, 18aDue to the divestments demanded by the Commission as part of the merger between Gaz de

40、 France and Suez, the Belgian TSO Fluxys will become ownership unbundledbGermany has 20 TSO, of which one is ownership unbundled cSociet Gasdotti SpA (owns ca. 5% of the national network) dLuxembourg received a derogation until 2009From Table 1 it is clear that legal unbundling, which is the minimum

41、 required by the directive, was not yet common practice in the European gas markets in 2004. By 2008 the majority of TSOs complied with legal unbundling; ownership unbundling remained the exception, though.ii. Third party access (for storage facilities)Besides the unbundling of the regulated network

42、 activities, non-discriminatory third party access (TPA) is also required by the second directive. TPA is an absolute prerequisite for creating a truly competitive gas market: if an unbundled TSO arbitrarily gives preferential treatment to one party and refuses access to another party, the market is

43、 seriously distorted. Therefore, the directive foresees regulated third party access for transport and distribution networks and LNG terminals, thus requiring the tariffs to be published. Storage and linepack services, on the other hand, are subject to either “negotiated-TPA” or “regulated-TPA”, dep

44、ending on the choice by the Member State. Negotiated-TPA means that the service provider negotiates the terms of access with each party, only requiring publication of the main conditions of use of the service. It is curious that the option of negotiated-TPA has remained available for such important

45、flexibility instruments in the gas markets, especially since negotiated access is neither available elsewhere in the gas directive, nor is it available in the electricity directive. Moreover, only storage facilities that are technically or economically necessary to supply customers are subject to TP

46、A. Since flexibility is an essential part of a gas market player portfolio, one could easily argue that all storage is important to guarantee supply.Table 2 Access regimes storage facilities 17aStorage for production or network management purposes3Storage TPARegulated-TPABelgium, Italy, Hungary, Por

47、tugal, Spain, LatviaNegotiated-TPAAustria, Czech Republic, Denmark, France, Germany, Netherlands, Slovakia, UKExclusion from TPAaUK, Germany, Austria, DenmarkNo storage/Other regimeLithuania, Estonia, Finland, Greece, Ireland, Latvia, Luxembourg, Malta, Sweden, Slovenia, Cyprus, Bulgaria, Poland, Ro

48、maniaTSO unbundling2004 142008 151618AccountsGermany,Sweden,Estonia,Latvia, Lithuania, BulgariaLatviaManagementIreland, Luxembourg, SlovakiaLuxembourg, LithuaniaLegalAustria, Belgium, France, Italy, Netherlands, Spain, Poland, Hungary, Slovenia, RomaniaAustria, Belgiuma, France, Germany, Greece, Ire

49、land, Italy, Estonia, Czech Rep., Slovakia, Hungary, Slovenia, BulgariaOwnershipDenmark, United KingdomDenmark, Germanyb, Italyc, Netherlands, Portugal, Spain, United Kingdom, Poland, RomaniaDerogation/No gas marketFinland, Malta, CyprusTable 2 lists some Member States choices for negotiated- or reg

50、ulated-TPA or another access regime. The choice for either negotiated or regulated access has lead to very different access regimes to storage facilities, even within the same country (e.g. UK and Hungary).iii. Evaluation of legal implementationFive years after the adoption of the second package, th

51、e different Member States have mostly transposed the rules in national law in the strict sense. However, the Commission assessed that several violations of the existing regulations are occurring throughout the EU. Consequently, the Commission has initiated infringement procedures in June 2009 by sen

52、ding letters of formal notice for not complying with applicable gas and electricity regulations to all Member States (except Cyprus and Malta) 29-30. Some of the mentioned violations are lack of information provided by TSOs to supply companies, inadequate network capacity allocation systems, and ina

53、dequate efforts by gas transmission companies to make maximum capacity available in order to create market entry opportunities.Similarly, most monitoring reports conclude that the actual implementation in the field fails to reflect the true spirit of the legislation, e.g. resulting in different inte

54、rpretations of “effective” unbundling and non- discriminatory TPA. Moreover, national authorities had eagerly been using the available room for national choices, resulting in diverging sets of rules across Europe. Although the complete harmonisation of gas market rules is neither attainable nor requ

55、ired, the diverging rules make cross border gas activities complex. Therefore, the rules should not be harmonised, but at least they should be compatible across borders.So, it seems fair to state that the legal implementation by the Member States was carried out not always effectively as is illustra

56、ted by the above mentioned infringement procedures; but that the content of the rules laid out had not always the projected effects on the liberalisation of the market. Therefore the third package is deemed an essential step forward on the path towards an integrated gas market. The proposed legislat

57、ion tries to remedy the flaws in the second package and takes the legislation to the next level of regional cooperation: e.g. it foresees in a framework for regulatory cooperation (Agency for Cooperation of Energy Regulators, ACER) between national regulators. Although the first two energy packages

58、did not suffice to create the integrated gas market, the Commission is learning on-the-job and if necessary she will propose a fourth and a fifth package to advance on the pathway towards a single gas market.b. Market structureThis section discusses what the current structure of the gas market is. Market structure is a concept that can cover a variety of market aspects. In this paper the concept is used to describe who the market players are, what the degree of market concentration is, whether the (national) markets are interconnected and what the role of storage and LNG facilit