Storage in Germany: The impact of the Madrid guidelines
Access to storage in Germany is currently based on a voluntary agreement of the major German storage operators BEB, Ruhrgas RWE (formerly Thyssengas) VNG Verbundnetz Gas and Wingas formed in March 2001 as part of the now historical association agreement. However, the situation in Germany is about to change, driven by two developments. First, the new guidelines of good practice for storage operators (GGSO), agreed this month by the stakeholders in the Madrid Forum
Newcomers to the German market often complain that storage is too expensive to be commercially useful
process. Second, the forthcoming German energy law, which will include regulation of storage access – as a basic principle there will be a regime of negotiated third party access in Germany.
The four major storage operators already mentioned operate around 20 underground storage facilities with a total working gas volume of 13 billion cubic metres (Gm3). This represents half of the total storage sites and approximately 70% of the total working gas volume. The access conditions are provided on the companies’ websites. The conditions vary significantly depending on the characteristics of the storage and the strategy of the company:
• BEB offers bundled services for its different storage sites
• RWE (formerly Thyssengas) and Wingas both offer unbundled services, where working gas volume, injection rates and withdrawal rates can be chosen independently.
• VNG offers a hybrid kind of service where the price depends on the withdrawal rate the customer is looking for.
• Ruhrgas offers bundled services not for single storage facilities but as a kind of virtual storage over the whole portfolio. Ruhrgas is the only company where transportation from and to the storage site is included in the fee.
None of these companies publish information about available storage capacity, aggregated inflows and outflows and historical utilisation rates.
Of the independent storage operators, Berlin based Gaz de France affiliate EEG- Erdgas Erdöl GmbH is the only one to publish access conditions for its salt cavern storage Peckensen near Steinitz (working gas volume of 60 million cubic metres). The remaining 14 operators of underground storage facilities in Germany do not publish access conditions. This includes regional gas companies like EWE or E.ON Hanse and local distribution companies like GASAG Berlin or swb AG, Bremen. In particular EWE is operating quite significant storage facilities.
Opinion on the possible impact of the new guidelines is mixed. In general the major German storage operators do not expect that the GGPSO will have a major impact on the services they have to offer. BEB for example thinks that the services they are offering cover more than 90% of the requirements of the GGPSO.
Representatives of the other German storage operators expressed similar opinions. Some German market observers think that the Ruhrgas system of storage access is not in line with the GGPSO. Strictly speaking, this may be true because the European association of the storage operators Gas Infrastructure Europe was unsuccessful with its proposal to make this kind of combined service explicitly part of the guidelines. But at the final meeting in Brussels – according to participants – a representative of DG Energy and Transport made a statement emphasising that the Commission will monitor the application
of the guidelines with some flexibility. He mentioned explicitly the Wingas storage facility where conditions that are market oriented are offered although the conditions are not totally in line with the GGPSO and he said that the commission will evaluate the Ruhrgas system carefully. Given this, Ruhrgas sees no need to change its present system which it considers already well adapted to the needs of the market.
A more interesting issue is whether the storage operators that currently don’t publish any conditions for third party access will follow the Madrid Forum guidelines, despite not being represented in the negotiation process. A spokesman of E.ON Hanse said, that the company will publish its access conditions in summer based on the stipulations of the energy law and taking into account the Madrid guidelines.
According to the latest draft of the energy law storage operators have to grant non-discriminatory access. They have
The bargaining power of potential customers may increase when the available storage capacity is published
to publish the location of the storage site, available capacity, gas quality, the total working gas volume, injection and withdrawal periods and minimum flow restrictions. The law, however, says nothing about the services the companies have to offer, congestion management or secondary trading. The GGPSO are much more detailed than the stipulations of the energy law.
Representatives of newcomers to the German market often complain that storage is too expensive to be commercially useful. Unfortunately with no prospect of regulated storage access tariffs, the question will at least for the time being not be investigated by the new regulatory authority. Some storage operators think that the bargaining power of potential customers will increase when the available storage capacity will be published. And operators argue that most of the transmission operators offer an extended balancing service as an alternative to the direct use of storage.
The GGPSO is not likely to impact dramatically on Germany’s storage market and direct result of this fact may be that the commission will focus greater attention on the issue. The first monitoring report will show how the commission will evaluate developments in Germany.
What the German government and market participants fear most is the possibility that the commission will start an initiative to regulate storage by an EU regulation similar to the one governing access to the transmission networks due to come into force in July 2006. A representative of the German ministry of economics has agreed to the Madrid guidelines but stated that the assessment would be much more critical if it becomes binding regulation.
An alternative for newcomers to Germany is the possibility of investment in storage at the German-Dutch border, like the Dutch companies Nuon and Essent did at Epe. The two companies have connected their newly developed salt caverns to the Dutch transmission system. But Essent just recently announced that it is currently negotiating with Ruhrgas to inject low cal gas stored at Epe into the Ruhrgas system.
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