Annual auctions successfully completed - demand higher than the offer

Gas Connect Austria held the 2022 annual auctions for transport capacities in July. GCA expert Marko Janicijevic tells us in an interview how these auctions work in practice and what the results were. The results were partly surprising, but also partly as expected.

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"A total of 23 network users from 10 different countries purchased capacity at GCA's annual auction.
A total of 218.3 TWh of transport capacity was bought at auction."

Where do the auctions take place and who can participate?

The auctions of Gas Connect Austria take place on the European booking platforms PRISMA and Re-gional Booking Platform (RBP). All network users who have registered via the platforms to participate in the GCA auctions and have concluded a capacity framework contract are eligible to participate.

Are there any other auction platforms or does all EU-wide transport capacities traded here?

In addition to PRISMA  and the Regional Booking Platform RBP there is also the Great Solution for Auctioning Platform GSA. On these platforms, all cross-border transport capacities of the EU transmission system operators are marketed - both on the primary market and on the secondary market.

How are the auctions announced and what is the general procedure?

he process of the auctions is specified in the Capacity Allocation Mechanisms Network Code ("CAM NC"). Annual auctions are always announced one month before the auction starts. Capacities on annual basis, as well as monthly and quarterly capacities, are marketed by means of the "Ascending Clock Algorithm" - a multi-stage ascending price auction.  In this process, transport capacity is offered at an increasingly higher price until market demand no longer exceeds supply. The base price in the first round is the regulated tariff multiplied by the applicable time factor, i.e. factor 1 for an annual product; 1.15 for a quarterly product; 1.3 for a monthly product; 1.5 for a daily product and factor 2 for hourly products ("within day").

How many bidders participated?

A total of 23 network users from 10 different countries purchased capacity in GCA's annual auction.

What were the results?

A total of 218.3 TWh of transmission capacity was purchased in the guaranteed annual auction. The total consideration of the booked capacities amounts to EUR 56.75 million with a share of auction over-revenues (means with prices above the regulated price). The occurrence of auction over-revenues shows us that the demand for the transport capacities of some points was much higher than the offer by GCA..

Which points were most in demand?

The highest demand could be seen at the points Entry Oberkappel, Entry Überackern SUDAL each at the border to Germany and Exit Mosonmagyaróvár at the border to Hungary. All these points achieved auction surpluses.

Were there any surprises compared to previous years?

Compared to previous annual auctions, no capacity was booked at the import point in Baumgarten this time. The capacities awarded at the Entry Oberkappel and Entry Überackern SUDAL points compen-sated for this and exceeded the demand for import capacities many times over in the past.

For how many years have capacities been booked?

As in the previous year, not only a high but also a long-term demand for GCA's transport capacities is evident. At the point of Exit Mosonmagyaróvár, capacities were booked for the next 15 years (i.e. until 1.10.2037). Entry Oberkappel and Entry Überackern SUDAL also show bookings beyond the next gas year.

What role do the results play for Austria's security of supply?

The lowered gas flow from Eastern Europe ensures higher import demand for natural gas from alterna-tive sources - these are located away from traditional routes. Both Austria and neighboring markets are increasingly supplying themselves from sources in the West. That this is not only a short-term trend but will be a significant part of future supply is reflected in the results of the annual auction.

What happens to capacities that are not booked?

GCA offers capacity that is not booked in the annual auction in the next possible auction - the quar-terly auction for the following gas year. This started on August 1, 2022, and has shown high demand there as well. As expected, auction surpluses were also achieved at the Entry Oberkappel and Entry Überackern SUDAL points.

Link to the results of the annual auctions on PRISMA.

Explanation of terms:

  • Capacity Allocation Mechanisms Network Code (CAM NC).
    The Capacity Allocation Mechanisms Network Code regulates how network users in the gas transmission system can acquire capacity rights.
  • Guaranteed annual auction
    Annual auction for capacities, which are available to the buyer for entry or exit on a guaranteed basis.
  • Entry/Exit
    Cross-border transfer points in the transmission network: entry and exit points in a market area. Net-work users can book their transport capacities at these points.