ENTSOG TYNDP 2015

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.

Ten Year Network Development Plan 2015 |

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