Ref. Ares(2015)4431499 - 20/10/2015
Ref. Ares(2018)5389783 - 19/10/2018
29 September 2015
Commission Consultation on an EU strategy for
liquefied natural gas and gas storage1
1 Who is GIE
Gas Infrastructure Europe (GIE) is an association representing the interests of European natural gas
infrastructure operators active in natural gas transmission, storage and LNG regasification. GIE is a
trusted partner of European institutions, regulatory bodies and industry stakeholders. It is based in
Brussels, the heart of European policymaking. GIE currently represents 67 member companies from
One of the objectives of GIE is to voice the views of its members vis-à-vis the European Commission,
the regulators and other stakeholders. Its mission is to actively contribute to the construction of a
single, sustainable and competitive gas market in Europe underpinned by a stable and predictable
regulatory framework as well as by a sound investment climate.
This document follows the questions of the consultation document, where the questions are in italic
and GIE’s answers are in blue. The answers are preceded by general remarks in section 2.
2 General remarks
Natural gas is well placed to make an important contribution to a EU future energy mix that is
reliable, affordable and clean. It is thus crucial that EU Energy and Climate Policy recognise this
important role, so that the EU gas market remains attractive for decades to come. Such policy
should provide for an appropriate regulatory environment and confidence in the perspectives for
the development of the natural gas market in the EU in the long-term future.
In this context, GIE would like to point at the Annex of the consultation document where a graph
describing the “Projected EU28 Gas Demand” is offering an inaccurate and rather pessimistic view
on the evolution of gas demand in Europe. GIE notes that this projection (PRIMES EE27) is based
on old data (Eurostat 2010), and it is not consistent with other public data already published by
the European Commission (e.g. Strategy 2030), industry bodies or other gas experts. For example,
the International Energy Agency is expecting a (slight) recovery of gas demand over the coming
years rather than a decline. Presenting consistent projections is important in sending coherent
messages to suppliers, investors and other market stakeholders and instil confidence in the
development of the EU gas market.
1 Consultation published on 8 July 2015 at: https://ec.europa.eu/energy/en/consultations/consultation-eu-
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3 Responses to consultation – LNG section
3.1 LNG in the EU today
1. Do you agree with the assessment for the above regions in terms of infrastructure development
challenges and needs to allow potential access for all Member States, in particular the most
vulnerable ones, to LNG supplies either directly or through neighbouring countries? Do you have any
analysis or view on what an optimal level/share of LNG in a region or Member State would be from a
diversification / security of supply perspective? Please answer by Member state / region.
GIE, as a European association, will not comment on the specific statements made by the
Commission about each region. Instead, GIE focuses its answer on topics and recommendations
targeted at European level, and leave specific comments about the situation on each country/region
to individual GIE members.
GIE members would like to see the capacity of their LNG terminals booked as much as possible. It is
up to the terminal users to decide what the “optimal use” of LNG infrastructures should be.
As for the ‘optimal’ level/share of LNG in a region or Member State, from a diversification/security of
supply perspective, GIE observes that there is no common optimal level/share for each region. Each
region/Member State is different and in each of them LNG plays different roles.
It should be taken into account that a LNG terminal is a gateway to many different producers and
sources of gas worldwide. LNG makes gas reserves around the world accessible to the European
market. Thus, LNG implies a diversification by itself, diversifying supply sources on a long term and a
short term basis, which is a strong insurance against supply disruptions of a given country/producer.
GIE notes that LNG not only provides diversification of supply but also adds to competition and
market functioning. In 2014, EU imported LNG from more than 12 different origins around the
world. EU LNG terminals are the entry point for LNG volumes which can enter the EU single market
and compete with and/or complement traditional pipeline gas supplies (e.g. Russia).
In case of supply disruption, increased LNG deliveries in BE, ES, FR, GR, IT, LT, NL, PL, PT and UK will
help covering Europe’s needs and free up pipe-gas for other parts of the EU.
Furthermore, LNG has already demonstrated it is an effective tool in addressing emergencies and
mitigating supply shortfall/demand spikes. For instance, following the Fukushima tragedy, by
accepting higher LNG prices, Japan was able to attract additional LNG supplies and increased its LNG
consumption for power generation from 50 bcm/y to >70 bcm/y. Other examples where LNG was a
key to mitigate supply emergencies are: Chile post curtailment of imports from Argentina (mid
2007), Brazil droughts impacting hydro-based power production (2014), Israel & Jordan post
curtailment of imports from Egypt (2012), etc.
Question 2: Do you have any analysis (cost/benefit) that helps identify the most cost-efficient options
for demand reduction or infrastructure development and use, either through better interconnections
to existing LNG terminals and/or new LNG infrastructure for the most vulnerable Member States?
What, in your view, are reasons, circumstances to (dis)favour new LNG investments in new locations
as opposed to pipeline investments to connect existing LNG terminals to those new markets?
GIE considers that any investments to enhance diversification and security of supply should take the
utilization of existing infrastructures into account.
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GIE believes that investments in gas infrastructure should primarily be market-based. However we
acknowledge that some specific investments which are not fully supported by the market might still
be needed due to externalities. In such case these might require targeted support. Such support
should however not be to the detriment of existing infrastructure and market-based projects.
The cost benefit analysis (CBA) for additional investments should be positive. It should be carefully
designed to take into account the risk of stranded assets.
Member States with remote areas that may not be economically viable to be connected to the
European gas network or are experiencing a lack of diversification of gas supply sources may benefit
from supplies of LNG from existing regasification terminals. This creates an additional supply route
to enhance security of supply in these regions.
In addition to land-based LNG terminals, Floating Storage and Regasification Units (FSRUs) could be
also considered because they need less time to be installed and above all, they are reusable. In
particular, when a FSRU is not used, it may be disconnected and used for LNG trading.
GIE supports efforts to moderate energy demand where the benefits exceed the costs. Natural gas
offers great opportunities for energy efficiency gains compared to other alternatives in sectors such
as power generation, transport and heating.
3. Do you think, in addition to the already existing TEN-E Regulation, any further EU action is needed
in this regard? Do you think the use of LNG gas and existing LNG infrastructure could be improved
e.g. by better storage possibilities, better network cooperation of TSOs or other measures? Please
GIE reminds that individual components of the gas infrastructure (i.e. LNG, UGS, transmission)
should not be addressed in isolation. Each component of gas infrastructure plays its role to ensure
that the whole gas system properly fulfils its role. Therefore, GIE believes that a holistic view of the
natural gas infrastructure business will ensure that synergy effects between different infrastructures
are duly taken into account.
GIE believes that before adding any new EU further policy action, it is important to ensure the timely
implementation of the existing EU legislation. In particular, timely implementation of the TEN-E
regulation will contribute towards streamlining administrative and regulatory procedures and
incentivising gas infrastructure projects.
Implementation of other EU legislation is also crucial. Implementation of network codes for instance
will further contribute towards operation of the EU gas network in an efficient and coordinated
From the overall perspective, utilisation of LNG import terminals depends mainly on LNG pricing on
markets in different parts of the world. It is worth noting that with new trends emerging on the
global LNG market (e.g. increasing LNG volumes on the supply side, decreasing EU domestic
production, etc.) an increased number of LNG cargoes are expected to arrive in Europe in the
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4. What in your view explains the low use rates in some regions? Given uncertainties over future gas
demand, how would you assess the risk of stranded assets and lock-in effects (and the risk of
diverting investments from low carbon technologies such as renewables and delaying a true change
in energy systems) and weigh those against risks to gas security and resilience? What options exist in
your view to reduce and/or address the risk of stranded assets?
Low utilisation ratios:
LNG is a global market. LNG is traded all around the world and today it is common to see LNG
cargoes easily diverted to other parts of the world, changing destination according to price signals.
The high prices in Asia and South America during the last years, together with the EU economic crisis
and cheap coal/CO2 prices, have caused LNG originally intended to the EU gas market and purchased
FOB to be diverted to other parts of the world (i.e. Asia and South America). Moreover, EU LNG
terminal operators developed re-export services enabling shippers to reload cargoes delivered at the
terminal (mainly DES). This explains even more the small utilisation rate, but re-exports also
provided an alternative source of income for LNG terminals operators.
Source: GIIGNL – LNG Industry Reports 2011-2014, GLE internal assessment.
With the decrease of price differentials between Europe and Asia, the number of reloading
operations in Europe has similarly decreased.
Simultaneously, the EU average regasification utilisation factor is expected to increase (as can be
observed during the first 8 months in 2015 compared to the same period in 2014).
The LNG market is constantly evolving and LSOs are also evolving and adapting to the new market
needs. LNG will arrive to the EU market, provided the EU gas market is attractive and also both clear
and consistent EU Energy Policy and adequate price signals are in place.
Risk of Stranded Assets:
According to IEA, stranded assets are “those investments which are made but which, at some time
prior to the end of their economic life (as assumed at the investment decision point), are no longer
able to earn an economic return, as a result of changes in the market and regulatory environment.2”
In the case of LNG terminals a low utilisation rate in no way indicates that the asset is stranded.
Stranded assets are those which are not viable from an economic point of view.
2 WEO Special Report 2013, IEA, 2013.
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Given uncertainties over future gas demand, GIE believes that investment decisions for projects with
positive CBA should be cautiously assessed. Criteria for the CBA methodology should be very
carefully designed. Once more, GIE would like to stress the importance of having a long-term EU
Energy and Climate Policy in place which ensures an important role for natural gas in the future EU
energy mix. This will help to support gas demand in Europe, and ensure that investors are taking the
right informed decisions.
5. The Energy Union commits the EU to meeting ambitious targets on greenhouse gas emissions,
renewable energy and energy efficiency, and also to reducing its dependency on imported fossil fuels
and hence exposure to price spikes. Moderating energy demand and fuel-switching to low carbon
sources such as renewables, particularly in the heating and cooling sector, can be highly cost-
effective solutions to such challenges, and ones that Member States will wish to consider carefully
alongside decisions on LNG infrastructure. In this context, do you have any evidence on the most
cost-efficient balance between these different options in different areas, including over the long term
(i.e. up to 2050)?
GIE is convinced that natural gas should play a significant role in the future EU energy mix and will
provide a valuable contribution in the move towards a low carbon energy system by replacing oil
GIE believes that there is a much greater role for natural gas/LNG than simply as a flexible balancing
and capacity backup to variable Renewable Energy Sources (RES) in a properly functioning internal
energy market. Natural gas/LNG is acknowledged as the strongest enabler of RES. In particular, gas-
fired power plants are flexible (time to full power generation capacity) and produce substantially less
emissions (CO2, CO, NOx, particulates)3 than their coal or oil equivalent. By switching coal-fired
powered plants to gas, EU power sector CO2 emissions would be reduced by almost 60%4.
Moreover, LNG has specific advantages in relation to its physical characteristics. LNG terminals can
provide the highest output over the whole volume5. They are an excellent source of flexibility with
an output which can be easily modulated on a very short-time and can be quickly refilled. LNG
terminals can also provide peak-shaving services either during winter time or during peak power
generation at times of low RES production. Moreover the use of LNG as a fuel for shipping or heavy-
duty vehicles offers an excellent opportunity for improving the environmental footprint of the
Thus, LNG terminals and RES are not competing, they are complementary. LNG terminals are
excellent candidates to enable the development of the EU Energy System transformation, playing a
key role in a low-carbon economy.
4 i.e. 810 million metric tonnes (http://www.gasnaturally.eu/uploads/Modules/.../eu-policy-july-2011.pdf,
5 1m3 LNG ≈ 600 m3(n) gas.
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3.2 Potential entry barriers for LNG
6. What in your view are the most critical regulatory barriers by Member State to the optimal use of
and access to LNG, and what policy options do you see to overcome those barriers? Have you
encountered or are you aware of any problems in accessing existing LNG terminal infrastructure,
either because of regulatory provisions or as a result of company behaviour? Please describe in
GIE aims to enhance the cooperation between the European LNG terminal operators with a view to
facilitating access to LNG terminals, fostering new development, increasing transparency and
accelerating progress towards completing the internal gas market.
As already mentioned, LNG terminal operators offer a lot of services (including new ones) such as
basic services, ancillary services and specific services.
However, the LNG world is changing rapidly and so the market needs. In order to keep their LNG
terminals as attractive as possible, optimise their utilisation and foster investments in LNG
Infrastructure, LSOs should be able to quickly develop commercial services in line with LNG market
7. What do you think are the most critical commercial, including territorial restrictions and financial
barriers at national and regional level to the optimal use and access to LNG?
GIE is not aware of any critical commercial barrier to access the LNG terminals. Nevertheless, GIE
members are prepared to improve their terminal services according to the market needs. For this
purpose, regulated GIE members would appreciate to be able to design and offer new services in a
timely manner (See also answer to question 6).
GIE currently offers tools with commercial information in order to promote the access to LNG
GIE developed on a voluntarily basis and in agreement with regulators a harmonised transparency
tool (called “LNG Transparency Template
”). This tool acts as a common gate allowing new users to
have easy access to information by directing them via hyperlinks from menus and submenus to the
necessary information already existing in the LNG Terminal Operators’ websites.
The LNG New Services Inventory
was launched in 2014 and provides an overview of new LNG
services offered by GIE members to meet market needs. In addition, it has a special focus on small-
GIE also developed a LNG Transparency Platform
, under the name of ALSI
where daily send-out
flows, as well as the daily amount of LNG stored at the LNG terminals within each country are
As regards Gas quality,
the present efforts on harmonisation of gas quality standards should be
continued. In principle, gas quality parameters should have a range as broad as safely and technically
possible in order to keep Europe’s competitiveness in the global LNG market and to minimise
additional costs in the LNG/ gas supply chain. This applies in particular also to the Wobbe Index.
6 ALSI is a GIE public platform making available operational data regarding the operation of the EU LNG
terminals. ALSI includes daily information at country level covering the LNG regasification capacity in operation
in the EU. Data is published on the website of GIE under the following link: http://lngdataplatform.gie.eu/.
29 September 2015
8. More specifically, do you consider that ongoing EU policy initiatives and/or existing legislation can
adequately tackle the outstanding issues, or there is more the EU should do?
GIE considers that EU should first and foremost ensure the implementation of the existing
legislation. GIE does not see any need for additional EU policy initiatives regarding access to LNG
Moreover, from a general perspective, GIE considers it paramount that the EU institutions develop a
strategy for gas which ensures an important role of gas in the future energy mix on the short,
medium and long term and to give the right signals for the gas industry in general. Given that gas
infrastructure (including LNG infrastructure) is a long term capital-intensive business (2050 and
beyond), a sound long term business climate is required. Clear, consistent and enduring policies are
required from EU policy makers that natural gas has a key role in the future of the EU energy mix.
3.3 International LNG markets
9. How do you see worldwide LNG markets evolving over the next decade and what effects do you
expect this to have on EU gas markets? Do you expect a shift away from oil-indexed LNG contracts,
and if so under what conditions?
Data from IHS7 shows an increase of global LNG output in the medium to long-term perspective –
from 240 million tonnes in 2014 up to 410 million tonnes by 2025 and 530 million tonnes by 2035.
This will result from projects to be commissioned in Australia, USA, Russia, Malaysia, etc. In addition,
one may also expect the LNG spot market to continue to grow in importance.
GIE notes that forecasts are envisaging a return of LNG to Europe, with an increase of LNG volumes
entering the EU market.
Indeed, the LNG regasified volume in the first 8 month of 2015 as published by LSOs on ALSI shows
an increase of more than 20% compared to the same period in 2014.
7 Long-Term LNG Market Outlook, July 2015.
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The following graph, based on data from GIIGNL, shows the evolution of the EU LNG average
utilisation factor from 2005 until 2014, as well as the LNG import volume evolution over that period.
Source: GIIGNL Industry Reports 2005 – 2014
The LNG market is a global market with dynamics which might change rapidly.
LNG terminals are long-term capital intensive investments with an asset life of 40 years and more. It
is therefore necessary to review the utilization of LNG terminals based on statistics beyond the last
2-4 years only.
10. What problems if any do you see with the functioning of the international LNG market,
particularly at times of stress? Are there specific actions the EU should take, in dialogue with our
international partners, including in trade negotiations, to improve its functioning and/or to make the
EU market more attractive as a destination for LNG? Could voluntary demand aggregation be helpful
in some way?
GIE believes that the international LNG market is working properly, also at times of stress as
evidenced by the Fukushima accident.
GIE believes that the EU should contribute to remove all possible (e.g. trade) barriers, if any, which
are located between the LNG producing countries and the EU gas market.
3.4 LNG technology issues including LNG in transport
11. What technological developments do you anticipate over the medium term in the field of LNG
and how do you see the market for LNG in transport developing? Is there a need for additional EU
action in this area to reduce barriers to uptake, for example on technology or standards, including for
quality and safety?
An important technological development in the field of LNG relates to the use of LNG as a fuel. LNG
is a technology allowing heavy-duty vehicles to meet the stringent pollutant emission limits of Euro
VI standards. LNG is also an attractive alternative fuel for ships to meet the requirements for
decreasing the sulphur content in marine fuels or to allow large-scale carriage on inland waterways.
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In order to contribute to the development of LNG as an alternative fuel for ships and trucks and thus
to contribute to a clean maritime and road transport, LSOs think that break bulk infrastructure and
services are essential for developing the business.
LNG refuelling stations for ships /trucks;
LNG satellite plants/storages;
Small scale liquefactions;
LNG bunker ships;
Loading of bunker ships;
Loading of small ships;
Loading LNG ships;
In some countries LSOs already offer the above services. GIE is of the opinion that these services
should be further developed.
GIE support the timely implementation of the existing legislation (e.g. Directive on the deployment
of alternative fuels infrastructure, TEN-T programme, etc.).
Floating Storage and Regasification Units (FSRUs) appeared a few years ago and there are presently
21 FSRUs active worldwide and 7 are ordered. FSRUs need less time than onshore LNG terminals to
be installed and above all, vessels originally commissioned as FSRUs are able to function as both a
floating terminal or as a conventional LNG carrier. Thus, when a FSRU is not used as floating
terminal, it may be disconnected and moved to another location or used for LNG trading.
3.5 LNG sustainability issues
12. Do you think there are any sustainability issues specific to LNG that should be explored as part of
this strategy? What would be the environmental costs and benefits of alternative solutions to LNG?
Please provide evidence in support your views.
GIE would like to underline that any future initiative aimed at making full use of LNG in the EU
should duly consider sustainability benefits offered by LNG/natural gas infrastructure. Firstly, by
substituting more polluting sources of energy like coal and oil with natural gas and LNG, a quick
reduction of greenhouse gas emissions can be achieved against low capital expenditure. This is for
instance the case of LNG that may replace oil and coal in remote areas not connected to gas
infrastructure. Additionally, LNG contributes to promoting sustainability, given the high level of
flexibility of its supplies that make LNG the ideal partner for the development and integration of
intermittent renewable energy such as solar and wind.
Furthermore, GIE welcomes efforts to ensure the wide use of LNG as a fuel in the maritime and road
transport sector (e.g. trucks). Such technologies can substantially contribute to the EU’s energy and
climate goals. When taking decisions about the mobility of the future, it should not be forgotten that
gas for transportation offers great opportunities for meeting the environmental targets of the
transport sector in the most economical way. Switching to LNG will deliver not just CO2 emissions
reductions but also significant air quality benefits for citizens, with lower NOx emissions, lower SOx
and few particulates.
29 September 2015
The EU directive for the deployment of alternative fuel infrastructure paves the way to further
increase the penetration of LNG and CNG in the transportation sector (especially maritime and
heavy-duty vehicle). The number of vehicles running on natural gas (exceeding already one million in
the EU) and the number of current refuelling CNG/LNG stations in place are just a sign that, with the
right incentives, this market can develop much more and replace the more polluting and more
carbon-intensive oil-based fuels in a cost-efficient way.
4 Responses to consultation – Storage
Underground gas storages are a vital component of the natural gas chain and a necessary backbone
of the European security of supply. Moreover, as a renewable back-up, underground gas storages
are a key factor of success for the European climate policy.
However, shrinking European gas demand, competition with other sources of flexibility (LNG, spot
gas, long-term gas import contracts with high take-or-pay clauses) and falling summer/winter
spreads have negatively impacted the storage bookings and storage prices these last years. If this
situation persists it would put at risk the whole storage industry and harm the security of supply in
Europe. Therefore, there is an urgent need to address the deep problems affecting the gas storage
The insurance value of storage and its key role as a security of supply provider should be recognized
at the European level. At the same time, a result-oriented approach should be maintained, enabling
each Member State to decide how to handle its strategy related to security of supply (the Gas
Storage Europe “toolbox” approach).
The system value of storage should be recognized by taking into account the benefits brought by
storage to the whole system when setting the transmission tariffs at storage connection points.
The existence of a flexibility market should be recognized, where storage competes with other
flexibility tools by ensuring a level playing field between them. Responses to consultation – LNG
4.1 Internal market constraints and challenges for storage
13. What opportunities or challenges do the supply projections for different sources, in particular LNG
and pipeline gas and low carbon indigenous sources, present for the use of gas storage / for gas
In contrast to other fossil fuels, thanks to its less polluting characteristics compared to oil and coal
and its abundant resources, natural gas already plays and is committed to play a key role in world
According to the IEA, natural gas is the only fossil fuel with a global growing share of the energy mix
for the next two decades, with a 21% share in 2012 moving up to 24% in 2040. In Europe however,
the share of gas in the energy mix has been diminishing due to the economic downturn, low CO2/
coal prices, energy efficiency improvements and the development of renewable energy sources. The
future share of gas remains uncertain and will depend on clear, sound and stable EU energy policies.
However, despite the challenging storage market situation, GIE believes that UGS will still play an
important role in the future due to the following arguments:
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Regarding pipeline gas, the fall in domestic production and growth in import dependency through
pipelines will get even more pronounced in the coming years. More imports from distant source
countries mean more demand for flexibility which can be an important factor leading to more
storage being required.
Regarding low carbon indigenous sources: their increase in the energy mix also means more demand
for flexibility in the power market that can be provided by gas-fired power plants. Underground gas
storage has an important role in providing physical gas flexibility to gas-fired power plants.
Storages seem to be a competent partner for LNG to structure delivered volumes and to optimise
the LNG usage, price and delivery. Especially as the transportation of cargos need time or in case of
LNG supply disruption already delivered and stored volumes can be used to meet (peak) demand.
14. Are, in your view, current market and regulatory conditions adequate to ensure that storages can
fully play their role in addressing supply disruptions or other unforeseen events (e.g. extreme cold
There are various aspects in the market and regulatory conditions that should be improved to let gas
storages fully play their role in addressing supply disruptions or other unforeseen events.
Regarding market conditions: summer-winter spreads have always been seen as a fundamental
driver of storage value from the shippers’ point of view. Their decline since 2009 has removed price
signal for storage: shippers prefer to cover their flexibility needs by sourcing gas on spot markets as
they might anticipate that the worst situation will never materialize. These unfavourable market
conditions prevent storage from fully playing its role as security of supply provider. In the short-
term, the impact of the low summer-winter spread on the gas storage levels is dampened as part of
the gas storage capacity has already been booked and/ or measures such as storage obligations are
in place. However, weak seasonal spreads will negatively impact the booking of storage capacity or
will lead to very low market prices that do not justify continuation of the gas storage activity. This
will eventually lead to a decrease in the available capacity in the medium term (due to the
mothballing/closing of storage facilities, project shifts, termination and depreciation).This
development is putting European security of supply at risk on the medium term as closing of gas
storage is either impossible or very expensive and time-consuming to reverse. In fact, seasonal
spread is a virtual, not physical estimate based on market sentiment about the availability of gas in a
given period: it may be a legitimate criterion to valuate storage but it does not reflect the complete
value of storage especially the insurance value (insurance against unexpected events). This can be
done by demanding shippers to ensure that they have availability of gas to be used in all situations
including unforeseen events, be it through market-based instruments, strategic storage or storage
obligations depending on the local and regional market conditions provided that the market
functioning is not distorted. That is what Gas Storage Europe calls the “toolbox approach”.
Regarding regulatory conditions: storage now competes on the flexibility market with other
flexibility tools which are more economically attractive and do not have the same constraints (they
do not face the same third party access requirements). Therefore, GIE considers that the regulatory
framework should be adapted to these new market conditions by ensuring a level playing field
between all the flexibility sources and by facilitating commercial innovation. One way forward, while
respecting the Third Package rules, would be to facilitate more commercial innovation for storage
products, for example the availability of new storage products enabling trading on the hubs. Finally,
fair transmission tariffs for gas storages are important in order to continue to attract gas to be
flowed in the transmission system as well as using storage and thereby the flexibility and security of
supply that it offers.
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15. As an alternative to mandatory reserves, how could market based instruments ensure adequate
Security of supply is a public good that will not always be met by the simple aggregation of the
supply and investment decisions of market players especially in case of market failure. Given the
current low spreads, market players seem to disregard benefits of gas storages for security of supply:
market players tend to favour spot purchases although they do not guarantee the physical
availability of gas in case of unexpected events.
To ensure an efficient use of gas storage facilities, the first thing to do is to repair some regulatory
barriers that lead to a disadvantage for gas storages compared to other flexibility sources. In some
entry and exit zones transmission tariffs are not appropriately reflecting costs or the benefits of gas
storages for the transmission network and for the gas market. Another barrier is that gas storages
are not always able to offer products that other flexibility providers can due to regulatory barriers.
In addition to a level playing field with other flexibility sources other measures could be taken in
order to ensure gas is available in case of unexpected events By incentivizing the use of storage,
provided that the market functioning is not distorted. One example is the UK system where
imbalance prices in a gas emergency provide appropriate incentives for gas shippers to balance
supply and demand. A second example is the Danish system where the TSO pays shippers that
ensure that a certain quantity of gas is in storage (the amount of stored gas can only be withdrawn
in case of emergency, the service is tendered).
However, as individual markets differ greatly (see also answer to question 16), there might be a
need for traditional storage-related security of supply measures (e.g. France) and strategic storage
(e.g. Italy, Hungary) provided that the market functioning is not distorted. For instance, in regards to
mandatory reserves it is important to ensure that such mandatory reserves are not used for other
purposes than an emergency situation to avoid market distortion. This could be the case if strategic
gas reserves are released in order to cope with price spikes rather than having the market to solve
an emergency situation. Differences in markets require different solutions: no one size fits solution
exists. Consequently there is also No one single level of gas in storage to ensure security of supply.
Under market based conditions flexibility in sourcing requires the proof of the physical availability
for the market. Therefore GIE proposes to clarify the responsible entity/ entities to fulfil the Supply
Standard and which options in the supply portfolio are allowed to prove the standard. GIE
recommends introducing a new criterion such as "physical availability of the supply sources" in
fulfilling the Supply Standard.
4.2 Storage infrastructure
16. Do you have any analysis or view on what an optimal level/share of storage in a Member State or
region would be? What kind of initiatives, if any, do you consider necessary in terms of infrastructure
development in relation to storage?
There is no common optimal level/ share for gas storage. There is no one common “storage
prescription” as each country’s energy system is unique, some main parameters can be considered
when assessing the storage requirement:
Demand ratio between summer and winter;
Ability to cover seasonal modulation needs and peak demand;
Structure of national gas demand;
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Gas share of the energy mix;
Characteristics of existing storage facilities.
In general, GIE is in favour of using the existing infrastructure before any decision about new
With a view to infrastructure development in relation to gas storage, the market conditions are not
conducive to new investment and actually have already resulted to gas storage facilities being
mothballed/ and even closed down. More interconnectivity and regional cooperation would be a
way forward but does not exclude the need to ensure that gas must be available when needed and
this is best done by ensuring that gas storages are being used.
17. Do you think, in addition to the existing TEN-E Regulation, any further EU action is needed in this
TEN-E Regulation is essential for the development of the internal energy market and plays a crucial
role in ensuring the security and diversification of supply (see for example the Inčukalns storage
facility in Latvia and the Chiren facility in Bulgaria).
However, as already explained, the main concern for SSOs today is to optimize the existing
infrastructure by having the storages filled at the beginning of the winter period.
As mentioned earlier, overall there is enough underground storage capacity at EU level. However,
this does mean that all Member States count with enough capacity at national level, due to for
example, geological reasons. In this respect, the TEN-E regulation provides a good instrument to
ensure that countries become well interconnected, providing the necessary infrastructure for those
Members States with little access to underground storage capacity at national level with access to
the capacity from other Member States.
18. Given uncertainties over future gas demand, how would you assess the risk of stranded assets
(and hence unnecessary costs), lock-in effects, the risk of diverting investments from low carbon
technologies such as renewables, delaying a transition in energy systems and how would you and
weigh those against risks to gas security and resilience? What options exist in your view to reduce the
risk of stranded assets?
First and foremost GIE believes that a number of key areas of energy policy need to be addressed:
Clear, consistent policies are required from EU policy makers that natural gas has a key role
to play in the future of the EU energy mix;
The EU ETS needs an overhaul so that cleaner technologies such as natural gas can compete
against less clean technologies such as coal on an equal footing, with external costs being
taken into account;
Subsidies for mature renewable technologies in the power generation sector should be
eliminated as they distort the internal energy market.
Indeed, SSOs find themselves in a situation which requires them to compete with price signals that
are below the costs they incur to operate and maintain their facilities. As a consequence, the risk of
stranded assets regarding underground gas storages is already a reality for some of them
(mothballing/closing of storage facilities in France and Germany). In order to reduce this risk and to
enable gas storage facilities to fully play their role as security of supply provider, the regulatory
framework must be improved (see question 19).
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4.3 Regulatory framework and potential barriers for storage
19. What do you think are the most critical regulatory barriers to the optimal use of storage in a
Then, GIE considers that there are three main critical regulatory barriers to the optimal use of
Level of transmission tariffs;
Restricted access to/from storage facilities;
Ability to offer customized products.
In some cases high transmission tariffs at storage-transmission interconnection points can account
for a significant portion of the storage costs (whereas storage facilities provide numerous benefits to
the system resulting in avoided investments and lower operational costs: see question 22). Lowering
transmission tariffs for storage is a way to incentivize the use of storage.
For storages to play an effective role within the framework of SoS, adequate filling levels are
required. The latter implies that the access to/from storage facilities (i.e. for respectively injection
and withdrawal) is not hampered by insufficient capacity at the transmission network. In this
respect, storage users should be treated on equal foot with other network users.
Finally, in order to ensure a level playing field between all the flexibility tools, it is crucial for storage
system operators to be able to answer to their customers’ needs by offering innovative products to
With regards to a regional setting, GIE points out that supply standards can be fulfilled by booking
gas storage in another Member State, but it should be taken into account that in that case also
interconnection capacity is ensured. Furthermore, double counting (i.e. counting the gas storage
capacity for more than one country) should be avoided.
20. Do you think ongoing initiatives and existing legislation can tackle the remaining outstanding
issues or is there more the EU could do? Do initiatives need to include additional issues further to the
ones described here?
Implementation and compliance with existing legislation is crucial before launching new initiatives.
Having said that, we recognize that Regulation 994/2010 on security of supply, needs updating to
reflect practical experience gained in the past few years as well as the opinions of various
stakeholders voiced in public consultations organized by the Commission.
21. Do you consider EU-level rules necessary to define specific tariff regimes for storage only or
should such assessment be made rather on a national level in view of available measures able to
meet the objective of secure gas supply?
Specific transmission tariffs for underground gas storages are needed and should be part of the tariff
network code. When setting tariffs for entry/exit points to and from storage facilities, one must take
into account that gas storage is not a net source of supply or demand and that users have already
paid entry and exit tariffs at import/ production and at end consumption.
GIE believes that transmission tariffs to and from storage facilities should recognize the benefits and
value that storage facilities bring to the overall system. .
GIE, therefore, strongly recommends that the proposed Network Code on Harmonized Transmission
Tariff Structures reflects the above arguments and points in a specific way so that NRAs can use the
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text of the Network Code as a tangible guidance when setting transmission tariffs at storage
connection points located on the networks for the regulation of which they are responsible.
22. Have you ever encountered, or are you aware of, difficulties in accessing storage facilities? Has
this concerned off-site or on-site storage facilities? Please describe the nature of the difficulties in
GIE believes that when it comes to the market access to storage few difficulties should be expected.
The reason is that transparency requirements today give the storage customer full knowledge about
the size of storage capacity and how it has been used and TPA requires that this storage capacity is
made available to the market. On top of that GIE has implemented the transparency platform AGSI
where it is possible to follow the day to day use of storage not only for each EU Member State (and
Ukraine) but also for each storage system operator and storage facility.
When it comes to the physical access to storage, however, unrestricted access to/from storage
facilities and from/to the transmission network is not always guaranteed which can devaluate the
storage business and create unfair competition and barriers to the access to storage. This should be
avoided as mentioned earlier (see for example the answer to Q19).
23. Have you ever encountered, or are you aware of, difficulties related to feeding LNG gas from the
storage site back into the gas network? If so please describe the nature of these difficulties
(regulatory provisions, company behaviour, technical problems) in detail.