Energy | Gas | Technical Report
Towards an efficient and sustainable tariff methodology for the European gas transmission network
18 January 2019
BY: CERVIGNI Guido, Ilaria Conti, Jean-Michel Glachant, Enrico Tesio , VOLPATO Francesco
Gas transmission in Europe is currently based on the so-called entry-exit model. Under such a model, Europe is divided into gas balancing zones – also called entry-exit systems – and capacity is charged at both entry and exit points of every balancing zone. Current entry-exit systems largely coincide with Member States’ territory. The cost of gas transmission networks in Europe is thus covered via the so-called entry-exit tariffs. The shift to the entry-exit model was one of the most effective measures included in the Third Energy Package (2007), which facilitated smooth transition from the traditional system, based on vertically integrated European gas industry structures to a single liberalised European market. However, as the EU gas market develops, the current tariff methodology is now being questioned, on the grounds that it may be unsuitable to achieve the objective of a single pan-European market, with unbiased gas flows and no obstacles to trading. This paper analyses alternative tariff methodologies that would address the drawbacks of the current system. The first approach meets the transmission revenue requirement by charging only the transmission network’s exit points to distribution networks and to directly connected end-customers. The second approach does not charge entry and exit intra-EU boundaries, and offsets the missed revenues via charges at the points of entry of foreign gas supply into the EU transmission system. Further, we investigate data on physical gas flows, commercial transactions between EU countries and non-EU suppliers and capacity bookings, from multiple sources. Our analysis suggests that: i) current gas flow patterns in Europe are different from those that minimize intra-EU shipping cost evaluated at the current transmission tariffs; we conjecture that this feature is related to the existing stock of long-term capacity holdings; ii) in case the optimal flow pattern was implemented, a material reduction of overall tariff revenues would occur, other things being equal; further, the revenue shortfall would be unevenly split among routes and system operators; iii) the cost of shipping gas to a European country from different points of entry into the European network is materially different, to the point that one cannot rule out the possibility that the current tariff model has an impact on the selection of the upstream suppliers.
logo cadmus Read it on Cadmus Download in open access

LATEST FSR PUBLICATIONS

Other
On 21 February 2024 the European Commission Directorate General for Mobility and Transport in cooperation with the Florence School of Regulation hosted an academic conference to explore opportunities and challenges [...]
Other
Rail has a key role to play in making transport more efficient and sustainable in the EU and elsewhere. However, increasing passenger and cargo volumes require investment in infrastructure, and [...]
Technical Report
In this work, we present the major application and impact areas of Contracts-for-Difference (CfDs) in a European context, describe the most relevant design dimensions and discuss several design packages for [...]
Other
After years of record announcements, frantic policy development and the establishment of substantial public support mechanisms, the clean hydrogen sector is nearing an inflexion point. Many clean hydrogen projects have [...]
Other
The safeguarding of critical offshore energy infrastructure has assumed a heightened level of urgency in the wake of the Nord Stream pipeline explosions in September 2022 and the suspected sabotage [...]
Other
The Performance Review Commission (PRC) is an independent body supported by EUROCONTROL with a remit to review and report on European air traffic management (ATM) performance. While performance has improved [...]

Join our community

To meet, discuss and learn in the channel that suits you best.

scroll

top