Drivers and Hurdles for Gas Market Integration in Europe: Evidence from the Belgium-Luxembourg Pilot Market Merger Project

Mr Chris  Cuijpers, Commission for Electricity and Gas Regulation (CREG), Belgium

Mr Andreas Tirez, Commission for Electricity and Gas Regulation (CREG), Belgium

This paper examines the various reasons for joining gas markets in Europe as well as the practical difficulties and concerns. It is true that an increasing number of transmission system operators (TSOs) are looking for cross-border opportunities to coordinate and eventually join activities.  The impulse for this trend is clearly given by the implementation of the European Third Energy Package and the European Gas Target Model, both aiming at an effective European Energy Union. However, this political and regulatory framework leave open whether this should be through coupling or through merging of markets. Coupling of gas markets aims to eliminate restrictions on cross-border trade in gas and enhance efficient price mechanisms. The European Third Energy Package brings changes to market design, for example the establishment of entry-exit regimes across Europe and provides European network codes to further harmonise capacity allocation, balancing and trading arrangements. Merging of gas markets, however, goes a step further and aims at removing borders in order to achieve an integrated cross-border zone in which interconnections between markets disappear, at least commercially. Merging may require large investments in transfer capacity in order to establish one integrated cross-border entry-exit and balancing zone. Sufficient transfer capacity is necessary in order to allow the dispatching of all gas flows within the integrated entry-exit zone.


The assessment is largely based on ongoing regulatory discussions in the various task forces of national regulatory authorities at EU Level which consider trends in European market integration. These assessments contribute to the setting of European targets in e.g. the revision of the ‘EU Gas Target Model’ and the ‘Bridge 2025’ and show the importance of cross-border coordination and solidarity in the context of security of supply.


Once the European scene has been set, the paper addresses the pilot market integration project between Belgium and Luxembourg. Since 1 October 2015, both countries share one common entry-exit zone, one common balancing zone and one common virtual trading point (ZTP –  Zeebrugge Trading Platform). This achievement is the result of the harmonisation of market rules and arrangements to remove the cross-border interconnection points from a commercial point of view. This project is the first cross-border merger between two TSOs of two different member States in the EU. The analysis of the Belgium-Luxembourg case, covering the development of the project as well as its implementation and the first market impacts, provides useful practical insights for considering further gas market merging projects in Europe.


Practical conclusions can be drawn since the paper combines a general assessment of the drivers and hurdles for cross-border gas market integration in Europe with a case study of the Belgium-Luxembourg gas market merger. A number of insights are provided to improve the understanding of gas market integration and to overcome the practical difficulties in order to realise efficient cross-border merging projects. The requirements for a full merger of two or more adjacent markets by merging their virtual trading points and balancing zones seem more complex than generally presented in European regulatory target-setting. Therefore, variants of market integration models should be considered in order to apply the most beneficial integration model according to the maturity, size, legislation and overall characteristics of the concerned countries.


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