Picture courtesy of Gasum
9 Incremental capacity process
9.1 Description of the incremental capacity process
The incremental capacity process has been introduced by the Commission Regulation (EU) 2017/4591 as a streamlined and harmonised Union-wide process to react to possible market-based capacity requests for an increase in technical capacity or creation of new capacity.
The requested incremental capacity is offered based on market demand: Technical capacity will be increased at an existing IP or through establishing a new IP, or by creating a physical reverse flow capacity at an IP that has not been offered before, but only if there are binding market commitments and subject to the positive outcome of an economic test.
The aim of setting rules for incremental capacity is to identify the need for new/incremental capacity and to allocate both existing and incremental capacity in an integrated way.
The process lasts two years and is divided into two phases: a non-binding phase in which demand for incremental capacity is assessed, and a binding phase in which network users make binding commitments for incremental capacity.
The non-binding phase starts immediately after the annual yearly auctions, at least in each odd-numbered year, with the assessment of demand indications for incremental capacity. Network users provide TSOs with their non-binding capacity demand. No later than 8 weeks after the start of the annual yearly auctions, TSOs shall produce market demand assessment reports (DARs) which shall be published within 16 weeks after the start of the annual yearly auctions. Among other things, the DARs should consider whether the TYNDP identifies a physical capacity gap that would leave a specific region undersupplied in a reasonable peak scenario, and whether providing incremental capacity at the interconnection point in question would bridge the gap.
They must also consider whether a national network development plan identifies a concrete and ongoing physical transport need. If the DAR identifies demand for incremental capacity that cannot be met by existing available capacity, the TSOs involved will continue with the incremental capacity process. If no respective demand for incremental capacity is identified, the process stops here.
In the design phase, TSOs carry out technical studies for incremental capacity projects and coordinated offer levels based on technical feasibility and on the basis of the DARs. A public consultation is held on the key elements of the draft project proposal and stakeholders are given the opportunity to provide feedback on the TSOs’ proposals. A key milestone following the design phase and public consultation is the submission of a comprehensive incremental capacity project proposal to the relevant NRA. The NRAs then have 6 months to issue coordinated decisions on the project proposal(s).
Following the NRAs’ decisions, the binding phase starts and binding commitments for incremental capacity are collected from network users during the annual yearly auctions. Auctions are used by default, but, subject to NRA approval, an alternative capacity allocation mechanism may be used.
After receiving binding commitments for incremental capacity offered in the annual yearly auctions, the economic viability of the incremental capacity project is assessed through the economic test. If the outcome of the economic test is positive on both sides of an interconnection point for at least one offer level that includes incremental capacity, an incremental capacity project is initiated. If more than one offer levels results in a positive economic test, the offer level including the highest amount of incremental capacity will be realized.
1 Reg. (EU) 2017/459, Network code on capacity allocation mechanisms in gas transmission systems.
9.2 Incremental capacity process initiated in 2021
The third incremental capacity process started immediately after the start of the annual yearly auction in 2021 when TSOs initiated the demand assessment phase. To analyze the progress of the incremental capacity process and to determine whether new capacity projects would be initiated as a result, data was collected from 37 ENTSOG members. Based on these data and further interaction with the TSOs, a report on the third incremental capacity process2 was prepared and published.
Additional information on this process can also be found in the annexes to that report, in particular in Annex 3.13 which contains the TSOs’ responses to the launched questionnaire. The figure below summarizes the results of the third incremental process. It shows the number of TSOs involved in the different steps of the process, as well as the outcomes of each phase.
2 https://www.entsog.eu/sites/default/files/2023-11/entsog_ICP_Report_2021-23_231129.pdf
3 https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.entsog.eu%2Fsites%2Fdefault%2Ffiles%2F2023-11%2FMAR0212-23%2520Annex%25203.1%2520-%2520Incremental%2520Monitoring%2520Responses.xlsx&wdOrigin=BROWSELINK
Market demand assessment
35 TSOs published DARs covering 45 potential incremental capacity projects
Design phase
7 TSOs conducted technical studies for 6 projects
7 TSOs consulted on 6 projects
39 DARs, performed by 28 TSOs, concluded that no incremental capacity projects will be initiated
Approval and publication
6 TSOs submitted 4 project proposals to the relevant NRAs, coordinated decisions were published for 3 projects
Auctioning
Alternative allocation mechanism
2 TSOs offered incremental capacity for 15 year per offer level for 2 projects
3 TSOs have proposed an alternative allocation mechanism for 1 project
Economic test
TSOs that used an alternative allocation mechanism recieved binding commitments in the first phase, none of the TSOs that offered incremental capacity in a yearly auction received binding commitments for any of the projects
Conclusion
Following the 2021 – 2023 cycle, only the TAP project, which is entering the second (and final) binding phase,
has been successful
Figure 66: Summary of the results of the third incremental process.
The DARs related to the second incremental capacity process are available on the ENTSOG website. The table below shows the projects where a demand for incremental capacity was reported in the DARs and provides information on the entry-exit borders and the TSOs concerned, and whether the different steps of the incremental capacity process have been executed or not. The table also includes the specific TYNDP reference number for the projects included in the TYNDP 2024.
None of the TSOs that were involved in auctioning of incremental capacities (the default option as explained earlier) received binding commitments from network users.
Consequently, based on Art. 22 of CAM NC, none of these TSOs or NRAs had to carry out a single economic test, however the German NRA did perform the test. In the end no positive outcomes of the economic tests were reported. However, the outcome of the (first) binding phase for the Greece-Albanian-Italian project that was offered through an alternative allocation mechanism was positive. This means that binding commitments were received from network users and the economic test performed in this regard was positive. The next part of the binding phase organised by the TSOs involved (SRG, DESFA and TAP) was successfully closed during the first quarter of 2024.
TYNDP 2024 reference number | Entry-exit border | Involved TSOs | Execution of technical studies | Launch of public consultation | Submission of project proposal to NRA | Publication of coordinated decisions by NRAs | Yearly auctions for incremental capacity |
---|---|---|---|---|---|---|---|
TRA-A-971 TRA-F-1276 TRA-F-1278 | GR-TAP | DESFA TAP | Alternative allocation mechanism | ||||
TRA-N-128 TRA-N-1112 TRA-F-378 | GR-ICGB | DESFA ICGB | |||||
TRA-A-1141 TRA-A-1009 | CZ-PL | GAZ-SYSTEM NET4GAS | |||||
Not included | PL-UA | GAZ-SYSTEM GTSOU | |||||
Not included | BE-DE | Fluxys OGE Fluxys TENP Thyssengas GASCADE Creos | |||||
TRA-N-1195 | IT-TAP | SNAM TAP | Alternative allocation mechanism | ||||
TRA-A-810 | GR-AL-IT | DESFA TAP SNAM | Alternative allocation mechanism | ||||
Not included | RO-UA | TRANSGAZ GTSOU |
Table 14: Projects for which a demand for incremental capacity was identified in the DARs.
9.3 Incremental capacity process initiated in 2023
Immediately after the start of the annual yearly capacity auctions in July 2023, a new cycle of the incremental capacity process has started. Figure 67 illustrates the timeline for this process.
The table below shows the current status of the incremental capacity process cycles that have had a positive outcome from the market demand assessment and for which a project proposal has also subsequently been submitted for consultation.
During this cycle, a number of TSOs and NRAs have chosen to accelerate the phases from the public consultation period in order to be able to offer incremental capacity during the annual auctions in July 2024 instead of a year later. As a result, a number of cycles have now been fully completed (status “Finished”), as can be seen in the table.
TYNDP 2024 reference number | Entry-Exit border | TSOs involved | Gas flow direction(s) concerned | Status & results of INC project |
---|---|---|---|---|
TRA-F-1048 TRA-N-670 | BG-BG (ICGB) | Bulgartransgaz EAD ICGB AD | Exit BG – Entry BG | Binding phase ongoing – IP Stara Zagora (Art. 30 CAM) |
TRA-N-1140 | BG-GR | Bulgartransgaz EAD DESFA S.A. | Exit GR – Entry BG | Binding phase ongoing – IP Kulata/Sidirokastro (Art. 30 CAM) |
TRA-N-1124 | BG-RO | Bulgartransgaz EAD SNTGN Transgaz S.A. | Exit BG – Entry RO | Finished without allocation of INC capacity – IP Negru Voda 1/Kardam (Art. 30 CAM) |
TRA-F-128 | GR-GR (ICGB) | DESFA S.A. ICGB AD | Exit GR – Entry GR | Binding phase ongoing – IP Komotini (Art. 30 CAM) |
TRA-F-1278 TRA-N-736 TRA-N-1131 | GR-GR (NNGS) | DESFA S.A. | Expansion of the Greek National Natural Gas System (NNGS) | Binding phase ongoing – Multiple Greek IPs (Art. 30 CAM) |
TRA-N-1195 | GR-IT (TAP) | Trans Adriatic Pipeline (TAP) Snam Rete Gas DESFA | Multiple | Consultation ongoing until 15 August 2024 |
TRA-A-1322 TRA-N-959 | HU-RO | SNTGN Transgaz SA FGSZ Ltd. | Exit RO – Entry HU | Finished after negative economic test – Csanádpalota (Art. 30 CAM) |
TRA-N-245 | PL-UA | GAZ-SYSTEM S.A. LLC Gas TSO of Ukraine | Exit PL – Entry UA | Finished without allocation of INC capacity – IP GCP GAZ-SYSTEM/UA TSO (Art. 30 CAM) |
Not included | RO-UA | LLC Gas TSO of Ukraine SNTGN Transgaz SA | Bi-directional | Finished without allocation of INC capacity – IP Isaccea 1/Orlovka 1 (Art. 30 CAM) |
Table 15: Current status of incremental capacity process cycles with positive market demand assessment and submitted project proposals.
A full overview of the Demand Assessment Reports is available on the ENTSOG website.