INTERVIEW Security of supply in uncertain times
Even in the coldest of winters our homes remain warm. And even in a tight market with high gas prices, Gasunie monitors security of supply. Britta van Boven, Commerce & Regulation Manager at Gasunie Nederland, and Matthias Schulz, Business Manager at Gasunie Deutschland, explain the role we play in this. Britta: ‘It’s not enough to pray for a warm winter.’
Wintry challenges
Britta: ‘Security of supply has never been more of a challenge in the Netherlands than in the winter of 2021–2022. When the economy started up again in the spring of 2021, we quickly saw the global demand for gas outstripping supply. Previously, in the Netherlands we never had to worry about possible shortages in the market; after all, in the Netherlands we could always depend on the gas fields in Groningen. That’s no longer an option. We now have to solve the supply shortage differently.’
Import and storage
Matthias: ‘In Germany we have always been dependent on imports. In that regard, this winter was no different. The situation in northern Germany is different to that in southern Germany: while the north is well connected with all kinds of import routes, transport capacity to the south is not inexhaustible. So gas storage is really necessary in southern Germany, and the volumes stored there turned out to be much smaller than in previous years.’
Sufficient storage capacity
Britta: ‘The fact is that we have no shortage of storage capacity, in Germany, in the Netherlands, and in Europe as a whole. In the Netherlands we can store more gas than we need; that part is all settled. But those storage facilities must be filled too. That’s an aspect we at Gasunie do not really have any control over: the filling and emptying is done by the parties that buy and sell gas.’ Matthias: ‘Gas storage facilities are emptied when demand – and thus the price of natural gas – is high. This happens every year: market parties fill the reservoirs with cheap gas in the summer and draw on these later when demand rises. However, last summer the gas in some of these facilities was hardly replenished at all.’
No one left out in the cold
Britta: ‘In the Netherlands, security of supply is primarily a task of the energy suppliers: they are obliged to have enough gas for their customers. GTS must ensure sufficient transmission capacity and we must also reserve a certain volume for use in homes, to meet the additional demand if the daily average temperature as measured in De Bilt falls below minus 9°C.’ ‘In Germany, gas transmission system operators have no such obligation,’ Matthias explains. ‘We do have a market area coordinator however: Trading Hub Europe (THE). This organisation is responsible for balancing the market. When necessary, THE buys gas and supplies it to shippers who have a shortage. With large quantities of gas being withdrawn from the storage sites early in the winter, THE has opened tenders for what it calls “Long-Term Options” or LTOs. With LTOs, the contract partners undertake to supply gas to the storage site if and when THE requests it. There is of course a price tag attached to such guarantees, but they do help ensure the security of supply.’
Call for better filled storage facilities
Britta: ‘Last summer we already saw that the storage facilities were filled less than they had been previously. Gasunie then called on the market parties to do the responsible thing. However, in terms of concrete measures, our options are limited. GTS and GUD are not allowed to trade or buy themselves. Though we are in consultation with all relevant stakeholders about the desired level of security of supply and how we can achieve this. And our efforts seem to be paying off. The coalition agreement of last December states that there will be mandatory filling percentages for the gas storage facilities.’
Paying for assurance
Matthias: ‘In Germany, we are also talking to the regulators. Currently, it is still entirely up to the market parties to build up the reserves as they see fit. There are, however, no sanctions when a party fails to deliver, so why would you hold any gas in reserve? Until now, what was lacking was a willingness to pay for gas delivery guarantees. Trading Hub Europe’s Long-Term Option product may just change that. After all, as long as there is someone willing to pay, there is often someone willing to be paid. The costs THE incurs for this are then passed on to all users of the system.’
Re-introduction of long-term contracts
Britta: ‘At GTS and GUD we do everything we can to maintain a high level of security of supply. The gas market is a market, however, and that’s not set to change either. I do expect that the major market parties will reassess their purchasing strategies after this winter, that we will see more long-term contracts again. Long-term contracts used to be the norm, but over the years they have been replaced by short-term contracts, both in the Netherlands and Germany. That was cheaper and more flexible. Long-term contracts are less flexible, but good for the security of supply.’