Dato - Dok.nr.1 User Group on balancing 12 September 2013 Energinet.dk

Agenda The balancing network code (Energinet.dk) 30 min Status of the balancing network code Balancing network code – system design rules Future system examples Data provisions Discussion on questions (all) 50 min Discussion on questions sent out before the User Group Opinions round-the-table Conclusions (Energinet.dk) 10 min Short break before shipper meeting Dato - Dok.nr.2

3 Status of the Balancing network code

Status of BAL NC The balancing network code is right now in the hands of the Member States Expected to be finalised at meeting in October Hereafter follows 3 months of comitology The balancing code will ”rest” for 3 months Thereby formally approved by the European Parliament Expected to be implemented into Regulation 715/2009 on 1 April 2014 Only minor changes expected from ENTSOGs version Dato - Dok.nr.4

Implementation timeline in BAL NC 3 possible implementation timelines: Fast track 1 year after rules have been adopted into Regulation Energinet.dk will primerely follow this path, implementing most requirements towards 1 October 2014 ”Semi” fast track 2 years after rules have been adopted into Regulation Requires NRA approval Some requirements (eg nDMS data) will be implemented towards 1 October 2015 Implementation with interim steps Stepwise implementation over 5 years Requires NRA approval Dato - Dok.nr.5

Market involvement Implementation time schedule for balancing in DK Dato - Dok.nr.6 Final model described STF (possible) Market Implementation step 1 DERA dialogue Initial method Final method delivered DERA Second DMS model DSO coporation – 2.DSO coporation 1. First DMS model DSO DSO cop. -3. nDMS Analysis ENDK User Group 1 & shipper meeting Implement. step The different topics will be discussed in one step User group 2 & shipper meeting

Dato - Dok.nr.7 BAL NC system design rules

Overall principles for BAL NC Framework Guidelines on balancing are based on 3 core principles: 1. Balancing must primerely be carried out by the shippers 2. The shippers must have the right market tools to fulfill its role as balancing responsible party 3. Shippers must have the right data, to fulfill its role as balancing responsible party Rationale: Dato - Dok.nr.8 A competitive market will be able to balance the system in a more cost efficient matter, than a TSO is capable of!

Operational balancing There must be developed a number of short term standardised products, for the market and the TSO to undertake operational balancing actions Products could be developed at eg. an exchange Title products (day-ahead and within-day) are first priority Title products exist at Gaspoint Nordic today, but must be designed differently (eg longer trading hours, more dynamic within-day products ect.) As a fifth option, TSOs can also develop a balancing platform, where public tenders with the market are performed Dato - Dok.nr.9

When is a shipper imbalanced? The TSO shall calculate a Daily Imbalance Quantity for each network user in accordance with the following basic formula Daily Imbalance Quantity = Inputs – Off-takes Dato - Dok.nr.10

Calculation of daily imbalance charge The marginal Sell Price = the lower of either the lowest price of any trades of Title Products in which the TSO is involved, or the Weighted Average Price of gas minus a small adjustment (max 10 %) The marginal Buy Price = the higher of the highest price of any trades in Title Products, or the Weighted Average Price of gas plus a small adjustment (max 10 %) The small adjustment = payment that shall incentivise network users to balance their inputs and off-takes Dato - Dok.nr.11 Marginal sell or Buy Price Daily Imbalance Charge

Daily imbalance charge - example Dato - Dok.nr.12 Price development over the gas day (on day-ahead and/or within-day) Weighted Average Price Weighted Average Price plus small adjustment Weighted Avereage Price minus small adjustment Highest TSO trade on STSPs Lowest TSO trading price on STSPs In this example  TSO charges the end of day imbalance of shippers being long with: lowest TSO trading price on STSPs  TSO charges the end of day imbalance of shippers being short with: WAP + small adjustment 06:00 Gas day starts06:00 Gas day ends

Possibility of providing a Linepack Flexibility Service The TSO can choose to provide a Linepack Flexibility Service, but only if there are the needed flexibility and TSO not need to enter into any contracts with any other infrastructure provider (eg. storages) if within-day obligations are not applied if it is offered on a transparent and non-discriminatory manner to the market Today linepack is offered as BSA, but in the future system: Dato - Dok.nr.13 Linepack Flexibility Service can be compared with a system wide balance margin

Dato - Dok.nr.14 Future system examples

Basic model Dato - Dok.nr.15 Gas day Upper physical limit Upper TSO reaction zone Lower physical limit Lower TSO reaction zone No TSO interference  Energinet.dk envisage a model with different ”zones”  Green zone = market balance with no TSO interference  Yellow zone = TSO reaction, through e.g. commercial products  Red zone = physical limits of the system  TSO reaction based on total system balance

16  Shippers (and TSO) are cashed out end-of-day  The physical balance continues (grey line)  TSO takes (trading) action within-day, when commercial balance crosses green limit  Shipper 2 trades himself into an imbalance on day 2, which ”forces” him to renominate  TSO can also trade the physical position

Dato - Dok.nr.17  Shippers balancing position continues across gas days  TSO takes (trading) action within-day, when commercial balance crosses green limit  In this example: TSO buys gas off shipper 1 on day 2 and sells it back to the market on day 3; could also be handled by ”moving” imbalance instantly from ”helper” to ”causer” (envisaged Dutch solution)  Shippers pay tariff for linepack, depending on position end of day

Dato - Dok.nr.18 Data provisions

19 Forecast D-.. Measurements & Prediction D Allocation D+.. Intra Day Metered Daily Metered Non Daily Metered. Not Provided Prediction Provided End of day value Prediction based on profiles and their variables (temp, …) Base Case End of day input measurement Provided Twice a day per network user. The measured quantity. Prediction Provided End of day value More precise prediction of profile variables (temp, …) Not provided No readings available Measured Estimated Based on profiles and their variables (temp, …) Measured Information Provision

20 Forecast D-.. Measurements & Prediction D Allocation D+... Not Provided Variant 1 During the day input measurements Intra Day Metered Daily Metered Non Daily Metered Status update of consumed quantity. Prediction Provided Estimated consumed quantity (diurnal profiles). Prediction based on profiles and their variables (temp, …) Prediction Provided Based on diurnal profiles or nominations. Estimated consumed qty. Provided At least twice a day per network user. The measured quantity. End of day input measurement Estimated Based on profiles and their variables (temp, …) Measured Information Provision

21 Forecast D-.. Measurements & Prediction D Allocation D+... Not Provided Prediction Provided Prediction based on profiles and their variables (temp, …) Variant 2 Intra Day Metered Daily Metered Non Daily Metered Provided Twice a day per network user. The measured quantity Not provided No readings available Not provided (Fixed) Measured Fixed Based on the forecast Measured End of day input measurement Information Provision

User Group on balancing Questions for preparation 12 September :00-10:30 Energinet.dk, Pederstrupvej 76

Initial questions The Dutch balancing regime is often referred to as the most well- functioning balance system in the EU, and is based on a form of ”trust” between shippers and TSO Do you agree with these statements, and why? Could a smaller scale copy of the Dutch, or the Belgian system work in Denmark (both models will be presented at the User Group) Are there balancing experienses from other countries (good/bad) that Energinet.dk should be aware of? Dato - Dok.nr.23

Trading products According to the balancing network code (article 12 to 15), there are 4 types of standardised short-term products which can be offered on the market, for the TSO to balance Besides day-ahead and within day products, which are mandatory, could you see yourself trading locational and/or temporal products during the gas day? What are the necessary trading windows, in order for you to react within-day? Please explain why? The balancing network code also allows for balancing platform where the TSO can hold tenders, if balancing actions cannot be fulfilled by the short term products (article 16) Do you see that short term products will fulfill the market’s (and TSO) need to balance, or should a balancing platform also be established? Please explain why? Dato - Dok.nr.24

End of day settlement Different balancing models are possible towards the end of day settlement (models will be presented at the user group), eg: Daily cash out to zero every day, at the daily imbalance charge (market price + small adjustment or TSO trading price) No cash out end of day, but usage of linepack flexibility service (with a fee) where balancing positions are continued Given af system, where both the daily imbalance charge and the linepack flexibility service price is linked to market prices, which model do you as shipper prefer? Please argument why? Dato - Dok.nr.25

Dato - Dok.nr : :45 6 Within-day data to shippers with DMS and BNG portfolios. First 6 hours of current gas day Within-day data to shippers with DMS and BNG portfolios. First 14 hours of current gas day Daily energy balance to all shippers 12 Within-day data – DMS and BNG portfolios Within-day data: SDV file XML Energinet.dk Online Gas day (D+1) Gas day (D)

Data provisions - questions When 2 updates are applied, are these timings suitable for you? If more updates are possible in the future, when are the most critical times? When no balancing margin is available, what is the critical number of updates for you to manage your balance? Dato - Dok.nr.27

Data provisions – data model questions Based on BAL NC text and todays presentation Which of the 3 data models would you as shipper prefer? Please explain why? Dato - Dok.nr.28

Dato - Dok.nr.29 Conclusions