Post on 03-Jun-2020
Indicators to measure market performance
Bart Vereecke
Madrid, 23 October 2019
To assess the performance of EU gas markets the AGTM* uses the so-called market health metrics…
AGTM indicators
Overview of EU MSs AGTM market health metrics – 2018
* The AGTM is a model for the IGM developed by the sector. It sets the following goal: “(...) competitive European gas market, comprising entry-exit zones with liquid
virtual trading points, where market integration is served by appropriate levels of infrastructure, which is utilised efficiently and enables gas to move freely between market
areas to the locations where it is most valued by gas market participants”. Source: ACER calculation based on ENTSOG capacity data, Eurostat and NRAs.
Market health’ metrics evaluate whether gas markets are structurally competitive, resilient and exhibit a sufficient degree of diversity of supply. Metrics: • Number of
sources • HHI • RSI
AGTM indicators
2018 EU gas hubs categorization
A gradual improvement of
metrics’ results is observed
since 2013
Traded volumes up
Diversity of products
improving
Several hubs functioning
better
But
Some ‘hubs’ do not take off
Limited improvement in
terms of forward liquidity
Most hubs remain at some
distance from AGTM targets
Has an ‘equilibrium’ been
reached?
Source: ACER calculation based on AGTM metric results.
… and market participants’ needs metrics
Market participants’ needs metrics assess the well-functioning degree of hubs via: • Order book
volume • Bid-offer spread • Number of
trades • Market
concentration for trading activities
To rank hubs, ACER also uses • Traded volumes • Breakdown hub
traded volumes • Number of
market participants
On top of the AGTM metrics, the MMR analyses additional market indicators to examine gas markets’ performance…
Additional MMR indicators
• Gas suppliers’ sourcing costs across MSs
• Levels of hub price convergence and hub price correlation
• LNG and UGS performance metrics
Source: ACER calculation based on Eurostat Comext, ICIS and NRAs
… as well as network codes related metrics
Additional MMR indicators
• Hub price spreads positioning compared to transportation tariffs
• Breakdown of IPs bookings per capacity product and booking’s
• TSO balancing volumes procured on the DA and WD markets as well as the
corresponding TSO share
* PRISMA covers products auctioned in 2016, 2017 and 2018; GSA 2015, 2016, 2017 and 2018 while RBP from May 2017 to end of December 2018.
Source: ACER calculation based on data from GSA, PRISMA, RBP, ENTSOG TP.
Observed possibilities and limitations
Possibilities and limitations
1. Data availability: can be an issue, for example, where there is no hub, there is often no data to assess. Hence, we tend to look at those MSs NCs, hubs, etc where they are working but less at why these do not work in some cases
2. Data manipulation: REMIT offers a wealth of data-mining potential which is as yet not fully utilised. The MMR team adds every year as much as possible new innovative REMIT based analysis and modelling capabilities
3. Some topics not included in AGTM impact market functioning: e.g. LNG, underground gas storage
4. AGTM and the Gas Directive have not ‘exhaustively’ defined what an ‘ideal’ market area is. AGTM is excellent for an aggregated view and the inclusion of other metrics as discussed helps to get to already quite a detailed view on MSs but less so on those where market is less developed
Triggering hub-improvement, particularly for those markets lagging behind are market integration initiatives …
o The AGTM states that if MSs fall behind AGTM metrics, on a continuous basis, specific hub-improvement actions shall be sought. Also markets’ integration should be explored
o AGTM is a voluntary exercise o Should decarbonisation Package be more
prescriptive? o If yes, should ACER via e.g. monitoring play an
instrumental role?
o MSs may be reluctant to embark on market integration efforts if benefits are not clearly established
o Therefore thorough understanding of benefits is important : e.g. at retail level, enhanced price-transparency….
How?
• Distinct regional thresholds but
also new indicators could be set
(e.g. detect market distortions)
• Indicators could be employed to
assess relevance of mergers (e.g.
retail level)
• Further guidance/roadmaps about
challenging topics (e.g. ITCs)
• Gradual market integration actions
can take place prior to a full
market merger
Tools for hub development – for discussion
AGTM proposes self hub-improvement actions or even deeper integration initiatives, such as market mergers. However, supranational market mergers turn out to be challenging (e.g. tariff aspects including ITCs, system management aspects). Voluntary or prescriptive approach
Evaluation of benefits is crucial
1. Goal: to unlock untapped IGM potential in MSs with weak(er) market functioning
2. How would this work?
• Specific metrics would be monitored versus a ‘minimum threshold’ which would trigger
targeted regulation in case not met
• How tailored regulation would be defined, defines monitoring practice
• Concept with practical implementation left open -> ad hoc monitoring
• Specific with a regulatory toolkit including specific areas -> rolling monitoring
Implementation of capacity or commodity release programs
Mandatory introduction of market makers in hubs
• Toolkit approach has advantage that specific metrics could be developed if needed and
monitored over time, however, it could have a lock-in effect if the toolkit is fully pre-defined. Mix
of both concepts to be used?
3. Monitoring indicators can be leveraged to further understand the fitness of possible tailor-made
measures. Do current MMR metrics suffice or would extra metrics be needed? Likely this would
lead to more detailed monitoring by ACER (and or NRAs) but possibly at the same time other
metrics might be dropped.
4. ACER practice in monitoring is currently to cover metrics for all MSs. With tailored regulation this
practice would need to be complemented with metrics that focus on one or more MSs.
… or with tailored regulation. Relevance of monitoring in bringing factual
insights. Which metrics would trigger targeted regulation?
Tools for hub development – for discussion