Impact of unpredictable renewables on gas-balancing design in Europe

The gas system in Europe is facing increasing unpredictability due to the interactions with the electricity generation system. Indeed, gas fired power plants make up an important back-up technology to deal with intermittency induced by wind-power integration. Therefore, the flexibility needs with respect to unpredictable power generation are actually transferred to the gas market. Applying the well-known electric power generation concepts of ‘unit commitment’ and ‘dispatching’ to the gas market, a hypothetical gas-transmission system has been modeled to verify, first, the physical impact of wind power forecasting errors on the gas system, and, second, its effect on the organization of gas-imbalance settlement for non-market-based and market-based design options. Increasing unpredictability leads to more expensive physical balancing of the gas system. These costs should be borne as much as possible by those effectively causing them. From a regulatory point of view in the European context, cost recovery by means of non-market-based settlement faces the problem of defining an appropriate cost-neutral penalty that covers the balancing costs and incentivizes shippers. Market-based settlement relates the variable imbalance tariffs to the actual system imbalance and thus any factor that strongly impacts on the system state like unpredictability. However, this mechanism raises imbalance-settlement tariffs for all unbalanced gas network users, even if the major source of unpredictability is a clearly identifiable shipper.