An inter-TSO compensation mechanism for renewable and low-carbon gases

Abstract

The Hydrogen and Decarbonised Gas Markets Package, published in 2021, proposes amendments to the current regulatory gas framework, in order to promote the integration of renewable and low-carbon gases in the EU energy system. This Policy Brief focuses on one of the proposed measures on the transportation fees for renewable and low-carbon gases, which introduces a 100% discount at all interconnection points, entry points from and exit points to third countries and entry points from LNG terminals. Such a measure might call for the establishment of an Inter-TSO Compensation (ITC) mechanism enabling the TSOs hosting gas transits to be compensated for the revenues not collected through entry-exit fees. This Policy Brief assesses the extent to which the experience gained from the implementation of the ITC mechanism in the electricity sector could be relevant for an ITC mechanism for renewable and low-carbon gases. We conclude that the complexities encountered in the implementation of the electricity ITC mechanism were mostly due to the characteristics of electricity and the way in which it flows over the network, and therefore could not be expected to reoccur in the implementation of an ITC mechanism for renewable and low-carbon gases. Instead, other implications of the premises for the introduction of an ITC mechanism for renewable and low-carbon gases might require further consideration.