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ERGEG GRI NW Cross Border Gas Transmission Investment

ERGEG GRI NW Cross Border Gas Transmission Investment. Virtual Simulation Specification and Design. Virtual Simulation Specification and Design Routes & Size. 14.35 – 15.20 Adam Cooper (MLCE) & Mike Young (Centrica). Stakeholder Involvement and Participation. The Role of Stakeholders

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ERGEG GRI NW Cross Border Gas Transmission Investment

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  1. ERGEG GRI NWCross Border Gas Transmission Investment Virtual Simulation Specification and Design

  2. Virtual Simulation Specification and DesignRoutes & Size 14.35 – 15.20 Adam Cooper (MLCE) & Mike Young (Centrica)

  3. Stakeholder Involvement and Participation • The Role of Stakeholders • Virtual Simulation to model a process • If not real, at least realistic • Essential to gain involvement to be credible • Inputs from Shippers / Traders and their requirement for capacity and view on its valuation • Representing the users of the asset to be invested in

  4. Shipper/Trader Inputs • Reflecting actual use of asset • Delivery of gas to a consumer market • Movement of gas between Trading Hubs • Hybrids of these, e.g. • Gas acquired at Hub for consumer market in another member state • Gas delivered from outside EC for onward transmission to be sold at Hub • Valuation of capacity based upon:- • Supply-demand gap • Expected price basis (inter-hub) • Expected gas re-sale margin • Availability of competing pipeline/route? • Major inputs in the simulation design from Shipper/Traders • Routes • Size

  5. Routes - principles • Based upon key elements of German, Dutch, Belgian and French Hubs and Networks • Between Trading Hubs • Between Entry and Exit Points of the wider Trans-National networks • Suggestions for routes for the Virtual Simulation

  6. Virtual Simulation Case – Suggested Routes • Route - Option 1 • NCG (EGT) to PEG Nord (via Belgium) • Conventional Route • NCG VTP E.ON Gastransport • Eynatten Exit E.ON Gastransport • Eynatten P2P Fluxys • Blaregnies P2P Fluxys • Taisnieres Entry GRTgas • PEG Nord VTP GRTgas

  7. Virtual Simulation Case – Suggested Routes • Route - Option 1a • NCG (EGT) to PEG Nord (Direct Germany to France) • Conventional Route • NCG VTP E.ON Gastransport • Medelheim Exit E.ON Gastransport • Obergailbach Entry GRTgas • PEG Nord VTP GRTgas

  8. Virtual Simulation Case – Suggested Routes • Route – Option 2 • TTF to NCG (EGT) • Conventional Route • TTF VTP GTS • Oude Exit GTS • Oude Entry E.ON Gastransport • NCG VTP E.ON Gastransport

  9. Virtual Simulation Case – Suggested Routes • Route Option 3 • TTF to PEG Nord • Conventional Route • TTF VTP GTS • Zelzate Exit GTS • Zelzate P2P Fluxys • Blaregnies P2P Fluxys • Taisnieres Entry GRTgaz • PEG Nord VTP GRTgaz

  10. Incremental Size - Principles • For the Virtual Simulation we should assume a dedicated pipeline • Therefore, size needs to be substantive in order to be realistic for a dedicated pipe • In “real world” smaller increments may lead to enhancement of existing pipeline (e.g. compression)

  11. Virtual Simulation – Incremental Size, proposals • Option 1 • 100 GWh/d • 3.3 bcm/a (N) • 9 mcm/d (N) • Option 2 • 500 GWh/d • 16.4 bcm/a (N) • 45 mcm/d (N)

  12. Virtual Simulation Specification and Design Design of Market Test 17.00 – 17.30 Adam Cooper (MLCE) & Mike Young (Centrica)

  13. Existing processes (1) • Open Season • Indicative (non-binding) bids by Users • Initial “price schedule” based upon indications • Binding commitment by Users • Regulatory Approval • Allocation of incremental capacity across binding commitments

  14. Existing processes (2) • Annual Allocation • Establish Capacity Release Methodology which incorporates Regulatory Approval • Price schedule published, based upon x% to y% increment above existing capacity (baseline) at Px to Py • Users “bid” for quantity of capacity at each price step • Binding, but can be amended up to “closure” • Users bids aggregated and compared with hurdle set to meet investment criteria, i.e. %age of investment project cost (? with NPV applied)

  15. Existing processes - issues • Pros & Cons of either approach • Open Season • Ad-hoc process • Lack of transparency, Black Box approach to Allocation • Needs co-ordination between operators • Annual Allocation • Regular diarised process • Methodology established and available at the outset • Equity of treatment of bidders • Are there alternatives?

  16. Innovative Case • How to gauge the desired level of User commitment to the project? • What level of risk falls upon:- • User • Community (other Consumers) • System Operators • Incentive related to risk borne • How is the hurdle for investment set? • Requirement to build, or just to sell?

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