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Gas market news 7

Autumn is already well on its way and major changes have taken and are taking place on the gas market. Hamina LNG terminal began commercial operations in early October and construction work and development of a commercial model for the floating LNG terminal have progressed at speed. In October, Finnish and Estonian ministers made a decision in principle to locate the floating LNG terminal in Inkoo at the end of this year. Compared to September, the gas energy price level has fallen significantly in the Finland-Baltic area during the October – even though the price level is still high. The gas consumption level has been exceptionally low and is more than 50% lower compared to the same period a year earlier. Low use of gas in Finland and more widely in the Baltics has resulted in the filling of the Inčukalns underground gas storage facility in Latvia, which is also important for Finnish market participants, also during October.

Finland has prepared for crisis situations and Gasgrid has requested the National Emergency Supply Agency to clarify the definition of protected customers in Finland so that preparation for any wide-scale disruption in the gas supply can be effectively carried out together with market operators. Gasgrid aims to identify the metering sites prioritised by the National Emergency Supply Agency as quickly as possible so that in the event of an emergency level in a crisis situation gas supplies can be ensured only for pre-specified user segments. Gasgrid and Baltic transmission system operators have worked together to systematically monitor market function and maintain a situational picture. During the autumn, the LNG terminal in the Port of Klaipeda in Lithuania has been a key infrastructure, covering a significant part of gas demand in the Finnish-Baltic area and Finnish gas users have relied on gas supplies through the Balticconnector. The Hamina LNG terminal and shortly also the floating LNG terminal in Inkoo will provide alternative routes to import gas to users in the Finnish-Baltic area.

Progress with preparations for the commissioning of the upcoming floating LNG terminal in Inkoo – launch of public consultation on terminal rules

Preparations for the floating LNG terminal containing liquefied natural gas have progressed to plan. Clarity was received on the location of the LNG floating terminal on 10 October when Finnish Minister of Economic Affairs, Mika Lintilä, and Estonian Minister of Economy and Infrastructure, Riina Sikkut, made a decision in principle to locate the floating LNG terminal in the port area of Inkoo, Finland at the end of this year.

Gasgrid is implementing the floating LNG terminal project on behalf of the Finnish government, and it aims to ensure the supply of gas for industry, heavy transport, combined heat and power (CHP) production and for households. The project, which is critically important to Finland’s security of supply, will secure the availability of gas well into the future. One critical and demanding construction phase has been completed in the Inkoo port area with the completion, in week 41, of the drilled pile work in the construction of the port terminal for the floating LNG terminal vessel.

The LNG terminal rules were submitted by Gasgrid and the Estonian transmission system operator, Elering AS, to the Finnish Energy Authority and to Konkurentsiamet, the Estonian Competition Authority, for the public consultation process. The terminal will operate according to fair market principles with regard to all operators. The Energy Authority launched a public consultation on 21st of October. The consultation period runs until 11th of November. The consultation letter and material can be found here.

You can find more information about the LNG floating terminal project here.

Schedule for updates to market terms and conditions for 2023

Changes to the market rules maintained by Gasgrid and to the gas market terms and conditions are expected for the coming year. The main changes are due to the LNG floating terminal in Inkoo, which creates a new entry point to the
Finnish gas system. The terms and conditions of Transmission Services approved by the Energy Authority as well as the Gas Market Handbook have come to the Energy Authority for public consultation at the same time as the floating LNG
terminal rules. Gasgrid considers that there will also be a need to update the Terms and Conditions of Balancing during the rest of this year. The consultation of terms and conditions of transmission services and Gas Market rule book began
on 21st of October and the consultation is open until 11th of November.

The terms and conditions to be confirmed by the Energy Authority will also be included to the Gas Transmission Rules maintained by Gasgrid once the Energy Authority has approved the documentation at the terms and conditions level.
With regard to the market rules, Gasgrid encourages market participants to contact Gasgrid at customerservice@gasgrid.fi concerning wishes to develop the market model.

You can find the link to the public consultation organized by Finnish Energy Authority here.

Hamina LNG terminal started commercial operations in early October

Hamina LNG terminal started commercial operations in early October and the first commercial nominations from market participants were received on the very first day of the month. Before commissioning of the Hamina LNG entry point, Finnish gas consumption was largely covered through the Balticconnector, which connects the Finnish and Estonian transmission infrastructure. According to information published by Hamina LNG, Hamina LNG offers a vaporisation and network entry service for the Finnish gas system at a daily capacity of 4 800 MWh. The terminal’s regasification capacity was fully booked until the end of the 2023 gas year (1 October 2022 – 30 September 2023).

Sanctions list control service introduced at the beginning of October

Gasgrid Finland has started to use Suomen Tunnistetieto Oy’s DOKS sanctions list control service. As a responsible operator, we want to know our customers and suppliers, and to find out information concerning business activities and ownership, including information about the actual beneficiaries. We aim to ensure that our customers’ and suppliers’ operations are aligned with Gasgrid Finland’s values and comply with national and international sanctions legislation.
Verification obligation for gas and hydrogen guarantees of origin began on 1 July 2022 The register of guarantees of origin for gas and hydrogen, G-REX, was launched on 1 April 2022 and the obligation to verify the origin of gas and hydrogen with a guarantee of origin began on 1 July 2022. We now have a few months’ user experience of the register and guarantee of origin service, and have clarified a few practical issues along the way. We will hold and info events about topical matters through Teams on Wednesday 16 November 2022 at 9-10.30 EET. The event is open to everyone interested and no pre-registration is required. You can find the link to the event here.

The schedule of Transmission and service pricing for 2023

The transmission and service price list of Gasgrid Finland as well as comprehensive material related to the pricing of the services will be published by the end of November. The document is published to market participants in accordance with Article 30 of the network code on harmonised transmission tariff structures for gas (tariff network code, TAR NC), including the reference price, i.e. the price of the annual capacity product, on which the shorter-term capacity products are based. In addition, in the document the technical characteristics of the gas system and relevant capacity information will be published. Also, financial data, which is used for tariff setting is included to the document. Before the publication of the transmission and service price list, the Energy Authority will organize a public consultation regarding the tariff multipliers, discounts and seasonal factors of the capacity products.

Gasgrid Finland is updating market role-specific framework agreements – target schedule is the end of October

The existing market role-specific framework agreement templates between Gasgrid Finland and market participants were prepared before the opening of the Finnish gas market. The market role-specific framework agreements are
identical in content for all market participants to ensure non-discriminatory and equal treatment. In Finland, the continuously developing gas market has created a need to update the framework agreements. In conjunction with updating, Gasgrid Finland will clarify and update the content of the agreements to better respond to open gas market business models and regulatory frameworks. In addition, the readability of agreements has been improved and references to gas market documentation have been clarified.

The updated framework agreements and currently applicable framework agreements form a chronologically integral entity so that the contractual relationship between Gasgrid Finland and the market role continues unbroken. The target schedule for concluding the updated framework agreements is that they will be signed by the end of October.

Efforts will be made to carry out the second correction round of 2021 balance errors in October, exact date will be notified on the Gasgrid Portal noticeboard

The Gas Transmission Rules (chapter 9.5) specify that in conjunction with balance settlement, the Transmission System Operator with System Responsibility (TSO) must carry out balance error correction rounds at specified intervals after the final balance error correction. The second correction round of balance errors normally takes place in April but with regard to the information on 2021 data, there is a delay in carrying this out.

After the final balance settlement, correction needs can arise for example because of errors in the TSO’s or distribution system operator’s (DSO) measurements. If these errors have been detected after the first correction round, they are
taken into account in conjunction with the second correction round. The results of the final balance settlement are not amended as a result of correction calculations.

Gas volume corrections can consist of the following components to be billed:

  • Imbalance
  • Capacity overrun
  • Commodity charge
  • Excise duty

The Gas Market Code and Information Exchange Guidelines were updated on 23 June 2022 and more detailed information can be found here in paragraph 7 First and second correction round of balance errors and related invoicing.
The paragraph describes the correction principles and pricing.

The exact date of the formation and sending of invoices for the second correction round of balance errors will be published in the front page of the TSO Portal.

Classification of gas priority groups for Gas Data Hub

Gasgrid Finland has requested the National Emergency Supply Agency to clarify the definition of protected customers in Finland so that preparation for any wide-scale disruption in the gas supply can be effectively carried out together with
market operators. Gasgrid aims to identify the metering sites prioritised by the National Emergency Supply Agency as quickly as possible so that in the event of an emergency level in a crisis situation gas supplies can be ensured only for
pre-specified user segments. Identifying the metering points in the information system also contributes to meeting the reporting obligation of market operators in notifying the National Emergency Supply Agency in accordance with the Act
on Mandatory Reserve Supplies.

In a retail market webinar held on 4 October 2022, the National Emergency Supply Agency defined the following gas users as retail market priority groups:

  • Priority group 1 – means household customers connected to the gas distribution network, including singlefamily houses, detached houses, terraced houses, apartment blocks and residential service units (care homes
    and various residential units)
  • Priority group 2 – means service customers related to healthcare, central social care, emergency situations and safety and security, education or public administration
  • Priority group 3 – means critical food industry
  • Priority group 4 – means the production of food industry packaging

More information about priority groups and their individual interpretations is primarily available from the National Emergency Supply Agency.

Gasgrid Finland has developed the gas data hub so that identification and classification of the priority groups described above can now be technically implemented in the system.

We hope that retail market operators will implement the classification in the information system based on the extent of their own deliveries as soon as possible and by no later than during November 2022. More detailed instructions on notification can be found in notices in the Gas Data Hub.

Sustainability materiality analysis survey

Sustainability at Gasgrid Finland has been integrated into the strategy and everyday management. Our sustainability programme embraces economic, social and environmental impacts. We want to involve our stakeholders in the development of sustainability. We use surveys to map the views of our stakeholders on the important themes in Gasgrid Finland’s sustainability. We sent stakeholders a survey which we hope they will respond to. We will use the
results of the survey to further develop our sustainability work and reporting, and the survey will also provide material for Gasgrid Finland’s strategy work.

Consultation concerning Balticconnector’s capacity allocation mechanism

Last summer, Gasgrid and Elering held a joint webinar, where the Transmission System Operators (TSOs) presented two alternative Balticconnector capacity allocation mechanisms – the existing Implicit Capacity Allocation Model, where
capacity allocation is based on confirmed nominations, and an alternative capacity auction mechanism. In the webinar, the TSOs presented an analysis where alternative capacity allocation mechanisms were assessed in our market area. A public consultation was held between 25 July and 23 August 2022 where the TSOs invited market participants to provide opinions on how they see the Balticconnector capacity allocation mechanism in the new situation where the
floating LNG terminal is integrated into the Finnish or Estonian gas system.

The TSOs received a total of seven opinions, most of which were in favour of the existing applicable implicit capacity allocation mechanism. This was considered to be an effective capacity allocation method because no contractual congestion arises. Furthermore, it was pointed out that in the changed market situation it made no sense to change everything at once and was better to first see how the market begins to function. The auction alternative was favoured because if its predictability since an auction offered assurance that the participants who had secured capacity would get gas volumes transmitted over the Balticconnector. On the other hand, this was also seen as a risk because capacity with the auction method could cause contractual congestion if the market participant did not use the capacity allocated in full.

Based on the feedback from market operators, Gasgrid and Elering are not currently proposing changes to the Balticconnector capacity allocation mechanism. The TSOs will monitor the market situation following commissioning of the new LNG terminal before making any subsequent decisions in line with the market situation.

Gasgrid Finland Oy is a Finnish state-owned company and transmission system operator with system responsibility. We offer our customers safe, reliable and cost-efficient transmission of gases. We actively develop our transmission platform, services and the gas market in a customer-oriented manner to promote the carbon-neutral energy and raw material system of the future. Find out more: www.gasgrid.fi/

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