Enervis Study: Gas Storage Reduces Costs of the Energy System

Gas storage saves consumers billions each year: Compared to a gas supply that relies exclusively on the import of gas and network expansion, the cost of using gas storage is about 2.2 billion euros less each year. This is the conclusion of the Enervis study “System Value of Gas Storage – Intelligence rather than Steel”.

Enervis premieres in estimating system value of gas storage

What is the value of gas storage in Germany for the energy system? To get to the bottom of this question, INES commissioned Enervis Energy Advisors GmbH with the study “System Value of Gas Storage – Intelligence rather than Steel”. Enervis investigated to what extent the costs of the energy system would increase without German gas storage. For the first time, Enervis has quantified the system value of German gas storage facilities in concrete terms.

Enervis examined two scenarios using a gas market model. The storage flexibility scenario looks at the existing infrastructure in the gas market. The scenario “Flexibility Import” compares this to a gas supply without the German gas storage facilities.

Enervis modeled the gas demand based on the temperature development from the base year 2012. Gas consumption in 2012 was average, however, it had a two-week peak when there was a fortnight-long cold spell in the end of the winter. This year is therefore particularly well suited to take a closer look at the design of gas infrastructures.

Security of supply endangered without gas storage

The calculations for the scenario “storage flexibility” show that gas storage covers the gas demand in Germany flexibly and close to consumption. Consumers prefer to use regional gas storage. Liquefied natural gas (LNG) or pipelines are hardly used. In addition, the German gas storage facilities serve foreign flexibility needs. As a net exporter of flexibility, Germany also has reserves for supply bottlenecks. The existing capacities for the transport of gas are sufficient in the scenario Storage Flexibility. The market areas are fully supplied. The gas networks therefore do not need to be further developed for existing gas needs.

The scenario Flexibility Import removes the German gas storage completely from consideration. Germany is dependent on gas imports in this situation. The elimination of German gas storage is partly compensated by existing storage in the EU and in Eastern Europe. In addition, Norwegian gas production provides more flexibility. Liquefied natural gas now also contributes considerable flexibility in the gas supply. The quantities of LNG imported into the EU are doubling and leading to a massive change in the import structure.

Nevertheless, the omission of German gas storage facilities cannot be compensated. This means that the security of supply cannot be maintained without German gas storage. Overall, the model outlines that supply to end consumers in Germany falls short of about 20 terawatt hours. That is about 2 percent of German gas consumption.

The delivery problems cause consumers to be cut off from gas supply – especially in times of high peak loads this amounts up to 2,210 gigawatt hours per day on the consumer side. This corresponds to almost one third of domestic gas consumption at these times. As a result, not only the German industry would suffer, so-called protected customers must also be turned off. Private households or district heating producers could thus be cut off from gas supply.

Network expansion and system costs increase sharply without gas storage

To not interrupt the gas supply, Germany and Europe would rely on an additional expansion of gas networks. The costs amount to 1.4 billion euros per year. Nevertheless, the restriction of the gas supply would not be fully compensated. The grid expansion can only reduce the supply shortfall to 462 gigawatt hours per day.

The changes in production, transport, delivery and purchase conditions increase the total costs of the energy system. Overall, the loss of German gas storage costs consumers an additional 2.2 billion euros per year.

Gas supply bottlenecks, possibly occurring within market areas, were not yet visible to Enervis. The complete system value of the gas storage is thus even higher. However, the study shows what cost savings the German gas storage means in any case.

Political action needed to save System value of Gas Storage

The system value of the German gas storage facilites is essentially to avoid excessive network expansion. At the same time, the system value continues to exist only if network expansion does not nullify this value. If grid expansion takes place at locations where gas storage is a cheaper alternative, system costs increase. The use of gas storage and network development must therefore be optimally balanced in order to create a favorable energy system.

In Germany, however, there is not the right regulatory framework for this. The current regulations mean that grid operators hold incentives to build new gas grids instead of using the existing German gas storage capacities.

In order to maintain the system value of gas storage facilities, the political framework conditions need to be changed. From the perspective of INES two measures are required in particular:

1. The efficiency comparison of network operators should be adjusted in such a way that in the future it also takes into account the cost-saving use of gas storage.
2. Network development planning should be implemented in such a way that the costs are systematically compared between the development of gas networks and the use of gas storage.

The Enervis study shows that gas storage reduces the cost of the energy system by over two billion euros annually. The current regulation counteracts this advantage of gas storage. An integrated view of gas networks and gas storage is therefore necessary. Because this generates significant cost advantages for the end customer and contributes to the security of supply.

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