NW GRI

Investment Project

Virtual Test CaseAdam Cooper - EFET

Outline of Virtual Test

• Aims

• Work to date

• Way forward

Aims

• Use a virtual case to examine issues impacting investment decisions

• Bring together the whole chain of processes from bidder demand through to investment decision and delivery

• Use the process to ask questions about risk allocation and transparency on decision making

Work to date

• 2 Workshops, core and reference group set up

• Developed and agreed investment framework and start of economic investment test

• Developed Shipper bid sheet• Innovative Tilburg experiment conducted• Development of Manual for near term

investment procedures

Investment Framework

• Virtual new pipe running from Germany through to France via the Netherlands and Belgium

• Each leg is 400km and has three compressors

• 2 sizes - 10 and 20 bcm

• Investment parameters agreed

Shipper bid sheet

• Based on a two round process

• Shippers:– bid for each hub to hub leg– face a price schedule with an upper or lower

band dictated by the investment size limits– only bid volume– see aggregate bids before round 2– have knowledge of economic test

Tilburg case

• An experiment for an innovative case looking at a short term capacity market and long term financial rights for transportation

• Main conclusions:– that auction processes can find the

appropriate aggregate level of investment via information transfer

– Prices decline toward marginal costs

The Manual

• Gathers information from different regimes to a range of investment related topics

• Already filled in for France, Germany, Netherlands and Belgium

• All GRI NW regulatory frameworks covered by the time of the September workshop

Conclusions to date

• Strong interest in looking at issues related to capacity allocation and investment

• Recognition that risk sharing is a key element of design

• Acceptance that transparency is important

• Commitment from at least 8 shippers to participate in test process

Way Forward

• On the way to the next workshop in September– Conclude interactive bid test by mid July– Complete Manual– Receive Tilburg report– Draft report in August and set agenda for the

next workshop