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Ten Year Network Development Plan 2015 |
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6.6 Price convergence
Price convergence measures the difference in marginal
prices of gas for each of the Zones as resulting from the
modelling of each price configuration, compared to the
median of the marginal prices for all Zones. Results are
presented for the Average Winter day, as this is when
the highest price differentials are likely to occur. The
marginal price for each Zone, climatic case and price
configuration can be found in Annex E.
The only price divergences have been identified for the “LNG” and “Russian expen-
sive” gas price configurations. The following maps show for each case the median
marginal price and the deviation of each country to this value.
The high level of price convergence identified through the TYNDP modelling may
appear inconsistent with experience of actual market prices. Nevertheless, price
convergence is already observed along a diagonal from Ireland-UK to Italy-Austria.
Under the Russian expensive price configuration the strong price convergence
across Europe derives from:
\\
The assumption of a full implementation of European regulation ensuring the
move of gas along price signals (which is valid for every price configuration)
\\
The use of a single price for a given supply source independently of the
import routes
\\
The fact that Russian gas sets the marginal supply for the whole Europe
except for the Iberian Peninsula
In fact when a supplier is in a dominant position it is likely he will set a price higher
than the average price. The supply dependence and diversification analysis helps to
identify those markets where a supply source has a predominant role.
The extremely high premium appearing in Bosnia-Herzegovina, Serbia and Greece
(only in 2035 Green and Low scenarios for the latter) results from their inability to
meet demand. Part of demand curtailment in Greece derives from the very high
share of gas-fired power generation estimated in line with the Vision 3 of ENTSO-E.
For the Green scenario starting in 2025, the implementation of Non-FID projects
and additional supply sources enable Europe to strongly mitigate the increasing
exposure to an increase of Russian gas price.
Under the LNG expensive price configuration the assessment replicates the ob-
served premium between the North and South Zone in France. This situation derives
from the strong role of LNG supply for the Iberian Peninsula and the South of France,
as well as for Greece, and the lack of interconnection of these regions with the rest
of Europe.
Under the Low scenario the European price convergence appearing in 2025 for the
Green scenario results from the fact that LNG is setting the marginal price of every
country as an effect of an increased need of imports. Such configuration only ap-
pears in 2035 for the Grey scenario.
Under the High Scenario, better interconnection and new supply enable most of
Europe to temporary (2025 in Green scenario and 2025 to 2035 in Grey scenario)
reduce LNG influence at the exception of Iberian Peninsula.
The strong discount observed in Romania in 2015 under the Grey Scenario is
explained by the indigenous production which is sufficient to meet the winter aver-
age demand case.