an operator view on gas storage in france and the uk
TRANSCRIPT
An operator view on gas storage in France and the UKGeorges Liens, Senior Executive Vice-President STORENGY
Florence School of Regulation, March 26th, 2014
Storage in Europe1
Value of storage
Examples
3
4
UK
France
Legal framework in the EU2
Agenda
2
* 50% share + O&M contract** 19.7% share
Storengy : a strong asset base in Europe …
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Gas Storage among European countries� More than 30 Storage System Operators
� 150 storage sites
� 90 bcm of working capacities
� Ratio working capacity to gas consumption: 19%
� Withdrawal rate: 1,882 MMcm per day
� Over half of total working storage capacity in Europe is in Germany, Italy, and France.
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Aquifer
- Large working gas capacity- Deliverability depending on rock
porosity and permeability but limited (50-100 days)
- Important O&M costs- Environmental constraints- Indicative development time : 12
years
Depleted fields
- large working gas capacity- deliverability depending on
rock porosity and permeability but limited (80-150 days)
- Use of E&P installation and cushion gas
- Indicative development time : 8 years
Salt caverns
- Limited working gas capacities- high deliverability (10-30 days)
for multi-cycling- Recoverable cushion gas- Water availability and disposal
of brine - Quality of salt: creep, insoluble- Indicative development time : 5
years
3 types of gas storage
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13% of volume and 12% of peak in the
world
80% in volume and 65% in peak in the
world
7% in volume and 23% in peak in the
world
Storage in Europe1
Value of storage
Examples
3
4
UK
France
Legal framework in the EU2
Agenda
6
UGS European Legal Framework
Regulated
Negotiated
n/a
Access regime The EU Third Energy Package:
• Lays down the principle of legaland operational unbundling ofthe Storage Operator
• Ensures Third Party Access(TPA) to storage
• Gives alternatives for MemberStates: Regulated Access /Negotiated Access (2/3 of EUstorages)
• Defines conditions of exemptionfrom TPA for new storages
• Defines duties and powers ofthe regulatory Authority
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Access regime to UGS: nTPA and rTPA
The Third Gas Directive retains the choice of access regime (negotiated TPA / regulated TPA)
• Commercial freedom in designing storage prices
Prices set by SSO for its storage products based on market demand and on management of investment risk.
• Visibility on income and rate of return
Commercial freedom => some visibility on the income and the rate of return over the lifetime of a facility, depending on market conditions.
• Storage tariff and return on investments approved by regulator
Regulatory authority establishes tariffs based on tcosts of the operator (investment and OPEX).
• Regulatory periods determine the visibility on income and rate of return
Periodical review by NRA (usually every 4 years) of storage tariffs. Revision periods determine the visibility on income and return on invested capital.
• Principle of transparency and non-discrimination
� Storage operator publishes the main commercial conditions, information on prices, services offered etc. and treats all customers on equal footing.
� Regulatory authority monitors access conditions and the compliance with the principle of transparency and non-discrimination.
nTPA rTPA
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Storage in Europe1
Value of storage
Examples
3
4
UK
France
Legal framework in the EU2
Agenda
9
Trade & Market
development
Security of Supply
System optimization
and economic efficiency
Where does the value of storage reside?
Follow the demand
Main indicator today to price gas storage capacities in
Europe
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15
Stogit TIGF Energinet Fluxys
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0.7 0.5
Unsold capacities by storage operators, 2013/14, TWh
% of total capacities 14% 22% 14% 6%
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Storengy Fr
13%
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08/09
5.6
1.4
09/10 10/1111/12 12/13 13/14*
* Average til 25/02/14** value @ 24 february 2014
6.0
2.9 2.92.2
Summer-Winter spread* forward, TTF, yearly average until 2013/14 and forward until 2016/17, €/MWh
2.31.5
1.0
14/15E **
15/16E **
16/17E **
* Definition : the spread is based on the difference between the average of the winter 6 monthly rate and the summer 6 monthly rate of gasSource : Platts and operators
Both current low prices and unsold capacities characterize storage activity today
Market values
• Intrinsic
• Extrinsic
THE VISIBLE
Insurance value
System value
THE INVISIBLE
� Based on difference between gas price in summer and winter.
� Reflects seasonal demand pattern.
� shorter-term price differentials : day-ahead, month ahead etc.
� function of price volatility, asset flexibility, optimization strategies.
Only part of the value of storage is visible
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� Optimized gas production� Cost efficient gas transport
� Hedge against supply risk
What can we do to avoid this ?
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Some key issues must be addressed
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Security of supply
•Recognized importance of gas storage as a security and geopolitical tool
•Awareness of increased dependency from external producers (distortion of competition, …)
Market Design
• One single gas market is not the remedy : each country has its own structure and specificities
• No/limited transport fees to access storage & better quality access to storage
• Optimized use of current infrastructure to limit costs (tariff increase)
European energy policy
• Promote the role of gasin the European energymix
• Value of gas vs. coal in power production through CO2 prices
• Regulators and government must react in front of new market conditions• Especially gas storage face a though time• Storage operators need to cover their own cost in order to maintain an
industrial asset assuring the security and independence of Europe
Storage in Europe1
Value of storage
Examples
3
4
UK
France
Legal framework in the EU2
Agenda
15
Hatfield Moore
Hornsea
Albrough
Rough
Humbly Grove
Holford
Hole House Farm
Depleted field
Salt Cavern
Fast Salt Cavern
Space: 0.1 bcmDelivery: 2 mcm/d
Space: 3.3 bcmDelivery: 41 mcm/d
Space: 0.3 bcmDelivery: 7 mcm/d
Space: 0.3 bcmDelivery: 18 mcm/d
Space: 0.3 bcmDelivery: 40 mcm/d
Space: 0.2 bcmDelivery: 22mcm/d
Space: 0.05 bcmDelivery: 11 mcm/d
UK : a favorable gas policy by limited intervention in gas storage
Gas Ten year Statement 2012
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• With a current 6% ratio (storage capacity/ gas consumption), the UK is well below EU average (14%)
• The security of supply relies today mainly on Rough availability (75% of the total storage)
• There is no spare volume in the existing UK storages. All capacity is booked each year in Rough and Hornsea and all the other facilities are optimised in own-use
Total storagecapacity~ 4.6bcm
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UK system for storage capacities
Negotiated Third Party Access (nTPA) � Rough CSL � Hornsea SSEHL
nTPA regime requirements in the UK
• Capacity allocation should be based on the maximum technical capacity of the facility
• Auctions or open seasons should be used where possible
• SSOs should consult on terms and conditions of service provision
• Where nTPA was provided the undertaking should be legally unbundled from other activities
• all SSOs should treat commercially sensitive information appropriate
nTPA Exempt Facilities
� Avonmouth NG
� Hatfield Moor Scottish Power
� Humbly Grove Star Energy
� Hole House EDF Trading
� Aldbrough Phase 1 Statoil/SSEHL
� Holford (formerly Byley) E.ON
� Hill Top Farm EDF Energy
� Stublach Storengy (GDF SUEZ)
Ofgem considers each request for exemption on a case by case basis.
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France : an evolving market
• The second largest storage capacity inNorthwest Europe, after Germany
• 3 Storage owners in France :
- Storengy , 12 sites in France WGV of 10 bcm
- TIGF, 2 sites WGV of 2,5 bcm- Géométhane , 1 site WGV of 0,25
bcm
• 95% of total storage capacity in Franceare aquifer
• 3 balancing zones : PEG North, PEGSouth, and PEG Southwest => potentialmerger into 1 single zone in 2018
• Contribution of storage in winter: up to60% of France daily gas consumption
*
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Potential evolution of the system in the medium term : keep the same system? regulation of the storage? removal of
storage obligation? …
Ongoing changes in security of supply mechanisms by the French government
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• Ensure continuity of supply mainly to residential clients :
• Cold winter 1 in 50 years (2% probability risk)• Extremely low temperature for 3 days 1 in 50 years
• Continuity of supply ensured by supplier
• Negotiated access to storage associated with storage obligation
• Obligation to ensure a stock level each 1st November corresponding to no less than 80% of the distribution grid demand
• This year, introduction of a storage obligation for the peak (withdrawal rate)
Compliance control by
the government
2 times a year
Rules for storage obligationRules for continuity of supply
Prospects for change
The main objective of any reform: security of supplyGas storages are key assets: up to 60% of gas consumption in winter in France
The means to do so: to send the right economic signal to keep a strategic asset in Europe
An obligation on the TSO to have access to a volume of gas to meet a defined security of supply standard.
A licence condition on suppliers to meet a set security of supplystandard
An obligation on suppliers to hold a minimum level of storagevolume to meet a defined security of supply standard. Ante and ex-post control.
NRAs define regulated returns and tariffs on all storage capacities. They can be sold through tenders or allocated to specific customers
Non specific Storage Obligation
Service Obligation on the TSO
Storage Obligation & Control
Regulated storage
Remuneration of the « physical gas possession » value attached to storages through a capacity market scheme
Options considered
A capacity market for gas
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