Gas Storage Netherlands has expressed its concerns about the unpromising text on gas storages in the EU network code on tariff structures currently being drafted by the European Network of Transmission System Operators for Gas (ENTSOG).

One of the problems identified by the Agency for the Cooperation of Energy Regulators (ACER) when starting the work on the network code is the treatment of gas storages that differs per Member State. Differences in treatment leads to inefficient investment (investors avoid regions where transmission tariffs are too high). In many Member States it is ignored that gas storage is not a net source of supply or demand. Gas Storage Netherlands agrees with Gas Infrastructure Europe (GIE) that transmission tariffs for gas storages should be based on the extra cost associated when using a gas storage compared to the route without gas storage, as gas storage users already paid entry- and exit tariffs at import/ production and at end consumption. However, benefits of gas storages are also often not reflected in the transmission tariffs for gas storages. It has been proven in various studies* that without gas storages, considerable investments would be needed in transmission networks and import facilities. Moreover, gas storages provide considerable advantages in stabilising the network and in enhancing market functioning.

The current treatment of gas storages situation leads to inefficient investment and in many Member States undue discrimination of gas storage users vis-à-vis market parties that do not book gas storage. Moreover, high transmission tariffs for gas storage have a detrimental to the investment climate for gas storages and may potentially lead to gas storage closures having a severely negative impact on the security of supply situation in the EU. Transmission tariffs can be over 1 EUR/MWh, leaving not much room for manoeuvre given recent low summer-winter spreads of as low as 1.50 EUR/MWh last winter. The problem of high transmission tariffs for gas storages has become even more pressing in the wake of increasing concerns on security of supply. All kinds of market  interventions are being considered for securing security of supply, while a straightforward measure of fully cost-based transmission tariffs for gas storages  is not yet pursued.

The draft network code on the harmonisation of tariff structures for gas consulted by ENTSOG is an excellent opportunity to solve this problem, but the current text leaves too much discretion to each Member State of how to set transmission tariffs for gas storages. With discretion Member States are not inclined to take the measures needed. Given the persisting problems of competitiveness of gas storage and the current concerns on security of supply, it is surprising that ENTSOG has not yet taken the opportunity to correct the treatment of gas storages in the EU in a network code that is called ‘Network Code on Harmonised Transmission Tariff Structures for Gas’. Gas Storage Netherlands urges regulators, the European Commission and Member States to seize the opportunity to ensure security of supply offered by gas storages and at the same time following the principle of cost-based transport tariffs.

* The Pöyry report of November 2012 commission by Gas Storage Netherlands states that capital expenditures in the transmission network would have been 9-16% higher without gas storages. See also a report of Waters & Wye Associates that concludes gas storages save up to GBP 2 billion on the transmission network.

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