ENTSOG TYNDP 2017 - Main Report

During 2016, EU gas demand increased again by 7% to 4,929TWh (current best estimate  1) ). The reduction in gas prices that had started towards the end of 2015 continued into early 2016, and although gas prices increased in the final quarter of the year, coal prices increased 68% compared to same period in 2015 meaning gas competitiveness increased in the power generation market. Power generation analysis has shown a significant coal to gas switch in a number of countries during 2016, linked to the above mentioned price situation, but this was also influenced by the ongoing Carbon Price Floor  2) policy in the UK. Further analysis of the sectoral evolution of gas demand in 2016 on a country level basis is not yet available. But the shift in the power generation market reflects one of the key differences between the Green and Grey scenarios, and as a result gas demand in 2016 has moved closer to the mid-range. In TYNDP 2015, ENTSOG scenarios were only reflecting part of the elements of the ENTSO-E TYNDP 2014 scenarios, which has impacted the level of gas demand under the Green scenario. It was part of the TYNDP 2017 concept to significantly strengthen the use of ENTSO-E scenario data, in this case from ENTSO-E TYNDP 2016, for power generation. In particular, TYNDP 2017 scenarios have been matched to electricity TYNDP 2016 scenarios and comply with the generation mix – and in particular the share of renewable generation – as resulting from ENTSO-E scenarios. The only flexibility introduced by ENTSOG on power generation relates to the respective shares of gas and coal in the thermal generation. Stakeholder input during the development of TYNDP 2017 included discussions around the “tomorrow as today” approach, where the assumptions driving the scenarios would take some time to develop. The data collection reflected this with a much narrower range in the short-term future than TYNDP 2015. Given the fluctu- ation that has been seen in recent years, and noting that 2016 demand appears significantly above the Blue scenario expectation, ENTSOG will take this into consid- eration in future editions. The principle of the scenarios developed for TYNDP is to set a range of possible futures for gas demand, in order to ensure that the gas infrastructure is accurately tested against those possible futures. They are not designed to be forecasts, nor visions of the future that aim for a specific target. The scenarios for TYNDP 2017 were discussed in-depth and supported during the stakeholder engagement process, where the assumptions would differ in order to create three expectations for gas demand: one stable, one increasing and one decreasing. The Blue Transition storyline represented the increasing gas demand scenario and was driven by a number of assumptions that was expected to provide an increase on an EU level. Driven by a moderate economic situation and green ambition, gas still plays a key role in the heating sector and a high penetration of gas in transpor- tation develops. The phasing-out of coal-fired power generation occurs and gas is higher in the merit order, both due to regulatory changes. The data collection provided a relatively stable final gas demand over time, with economic growth and transport being offset by energy efficiency measures decreas- ing residential and commercial consumption. The most significant change, as mentioned by the ACER Opinion, was the increase in gas demand for power gener- ation. This data was made publically available for comment in July 2016 following the 6  th Stakeholder Joint Working Session to aid transparency. ENTSOG did not receive any comment regarding the Blue Transition scenario following this data publication. Gas demand in the Blue Transition scenario perceived as potentially overoptimistic

 1) Based on TSO preliminary data when available, otherwise using Eurogas preliminary data: http://www.eurogas.org/up- loads/media/Eurogas_press_release_-_More_gas_use_in_2015_and_2016_makes_CO2_emissions_tumble.pdf  2) https://www.gov.uk/government/publications/excise-notice-ccl16-a-guide-to-carbon-price-floor/excise-notice-ccl16-a- guide-to-carbon-price-floor

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Ten-Year Network Development Plan 2017 Main Report