Gas Storage

In the last years, operators of German and European gas storages have faced many challenges. The market was and still is characterised by excess capacities. This applies not only to the available working gas volume (WGV) but also to the injection and withdrawal capacity. In the figure below, the situation is illustrated for the available withdrawal capacity in Germany.

[Available withdrawal capacity and peak demand of withdrawal capacity (Illustration)]

Intense competition, changing market conditions and the combination of low variable and high capital costs – as it is typical in the asset business – has led to market prices that are, in many cases, nowhere near enough to cover the full costs of service. At the same time, the general perception is that gas storages carry substantial value, not only for fulfilling their “traditional” functions of providing seasonal swing and covering demand peaks. Gas storages also represent an insurance against unforeseen events by e.g. providing additional volumes and capacity in case of extreme weather events and production or transport failure. At the moment, however, this value cannot be monetised in the marketing of storage capacities.

Uncertain prospects

Different developments in the European gas market have opposing effects on the storage market and lead to great uncertainty regarding the future of storage assets. In the short- to mid-term, the European gas production is going to further decline and, thereby, the seasonal production swing. This is considered to increase the need for storage. On the other hand, the trend towards lower gas consumption reduces the need for storage. In the long-term, gas storages are sometimes expected to have a key role in the context of energy system integration – by offering a long-term and large-scale storage option for excess power production from renewable energies. To what extent gas storages will be used in the energy transition, largely depends on the conditions set by future energy policy and regulation.

Pressing questions

Under these circumstances, a number of key questions arise for storage system operators, storage users, storage owners, investors and, not least, for political actors:

• What are the factors influencing the development of the storage markets in Germany and Europe?
• How will storage utilisation, prices, revenues and costs develop?
• Which storage facilities would most likely overcome a consolidation phase?
• Are there undervalued storage assets which are worth acquiring?
• Are write-downs necessary for certain storage facilities and, if so, to what extent?
• Which are the storage products that will be profitable in the future?
• How should the political framework be set in order to ensure that neither a situation of excess nor shortage of gas storage capacity occurs in the future?
• How can the storage industry bring their concerns into the political discussion?

Consulting services

In this context, we offer the following consulting services:

• Benchmarking of gas storages
• Evaluation of investment and divestment projects
• Due diligence for investors
• Support in price revisions and arbitration proceedings concerning storage or flexibility service contracts
• Market analyses and development scenarios for the gas storage market
• Strategy development for storage operators
• Strategy development for storage operators