The value of gas storage – Towards a new role in the gas supply chain?

Gas storage facilities are an essential tool of the natural gas supply chain. Fully booked and filled up before winter season storage capacities are the backbone of Europe’s security of supply as gas in storage sites are located physically close to the demand area. Ideally, the market should have the right incentives to make full use of storage capacities. Unfortunately this is not reflected in the current market conditions for flexibility services from UGS1. Over the last five years market prices for storage capacities have dropped below cost level for storage operators (SSOs). The insurance and system stability value of UGS is seen as a public good and not valued in market prices. SSOs are reacting with project shifts, termination and depreciation of their investments. A reduction of storage capacities in Europe in the coming years would be in conflict with increasing flexibility demand coming from growth in import dependency through pipelines from distant sources and the increase of low carbon indigenous sources in the energy mix, which means more demand for flexibility in the power market. What will be the future role of UGS in providing physical gas flexibility in the future low carbon energy system?