Examining the regional flexibility of Europe s gas storage market

Transcription

1 Examining the regional flexibility of Europe s gas storage market Dr Axel Wietfeld CEO and Chairman of E.ON Földgáz Storage 6th Annual European Gas Supply and Infrastructure, 2012

2 Agenda Added value of gas storage in the gas supply chain Regional storage market Future challenges and innovation in the storage industry 2

3 Agenda Added value of gas storage in the gas supply chain Regional storage market Future challenges and innovation in the storage industry 3

4 Gas storage contributes to flexible and sustainable energy supplies, and decreases the risk of price volatility Flexibility Balancing the difference between summer and winter consumption Necessary for base load gas transportation Price Optimisation Reducing supply costs by the ability of realising time/location swaps Realising spreads Avoid direct effects of short term extreme price changes Security of supply EU production expected to fall significantly by 2020: Import ratio >70% Technical, economic and political risks appear in the transit countries Obligation driven by European Union 4

5 The changing role of gas storages Flexibility Optimisation Security of Supply The Hungarian gas- and storage market as an example Overlap between injection Injection and withdrawal optimisation period in the function of gas price 40,000 30,000 20,000 10, ,000-20,000-30,000-40,000-50,000-60, [thm3] Gas crisis in 2009 [EUR/MWh]; [USD/thm3] Injection Injection Withdrawal Average Átlag hőmérséklet Withdrawal Temperature TTF (Bunde) Átlag Average hőmérséklet Temperature Averagre Wholesale WS price price 15ºC Underground storage keeps the leading position in the flexibility market 5

6 An additional pillar: Optimising with storage driven by spread Flexibility Optimisation Security of Supply Price developments on spot market during 2011/2012 CEGH Day ahead EUR/MWh 40 EUR/MWh Price difference in crisis 19 EUR/MWh 26 EUR/MWh 21 EUR/MWh Seasonal price difference 5 EUR/MWh Price spread-driven utilization of storage capacities price optimisation via time swaps Price differences between ~5 up to 19 EUR/MWh in 2011/12 Extreme price differences in critical situations (extreme cold/shortage) can be avoided by using earlier stored cheap gas! The value of gas in storage is a function of the expected value of gas in the future 6

7 Optimizing with fast-churn storage facilities driven by extrinsic value Flexibility Optimisation Security of Supply Intrinsic value Ability to capture the summer/ winter spread through the total size Extrinsic value Ability to capture daily price spreads through fast-churn capability High injection & withdrawal peak in comparison to working gas volume (fast churn) New nomination process, enhanced information exchange with the customer Key role in daily and in short-term arbitrage deals Example: Holford - EGS UK Storage captures more value from daily price spreads than from seasonal spread, requiring new methods 7

8 Increasing need for imports and thus additional pipelines in the EU to diversify supplies Flexibility Optimisation Security of Supply Natural gas supplies in Europe [bcm] Potential pipeline projects % 9% 23% % 11% 25% % 10% 26% % 14% 11% 26% future projects other non-eu imports* Algeria Russia Trans Adriatic Pipeline (TAP) (10-20 bcm/a) South Stream (63 bcm/a) White Stream (32 bcm/a) Nabucco (31 bcm/a) South Caucasus Pipeline (SCP) 19% 34% 18% 31% 19% 27% 18% 18% Norway domestic production South Stream southern branch (10 bcm/a) IGI (Onshore) (8-16 bcm/a) IGI Poseidon (Offshore) (12 bcm/a) TANAP Trans Caspian Gas Pipeline (TCGP) New pipelines imply demand for storage developments * Qatar 5%, Egypt 1%, Trinidad 1.5%, Nigeria 3% (2010) Basis for imports: contracted volumes and prolongations Demand forecast according to IEA World Energy Outlook

9 Storage capacities and development projects Flexibility Optimisation Security of Supply Working gas volume (in bcm) in Europe from 2012 until Baltic Pipe (3) Nord Stream (55) Development from 2012 (under way and prospects) South Stream (63) White Stream (32) 95.3 Storage capacity in Galsi (8) Trans Adriatic Pipeline (TAP) (10-20) South Stream southern branch (10) IGI (Onshore) (8-16) IGI Poseidon (Offshore) (12) Nabucco (31) TANAP South Caucasus Pipeline (SCP) Trans Caspian Gas Pipeline (TCGP) Source: GSE Storage Map, Additional storage capacity is needed in order to guarantee security of supply (supply areas in larger distances, transit country risks, n-1 principle)

10 Agenda Added value of gas storage in the gas supply chain Regional storage market Future challenges and innovation in the storage industry 10

11 Cooperation between countries in the Danube region intensifies (inter alia in energy) Areas of action Water quality, sustainable water management Minimizing environmental risks Nature conservation, biodiversity Sustainable energy supply in the region HU-CZ Transport development Human relations and tourism Institutional cooperation Information and knowledge-based society Issue Energy prices, fragmented markets, and problems regarding security of supply Strategy Address cross-border challenges by coordination of national investments Enforce regional cooperation to develop inter alia North-South gas interconnection projects First result Danube Regional Gas Market model SME Cooperation Strengthening security. Investing in human capital Ensuring that all countries of CEE have access to storage facilities

12 Intelligent combination of storage portfolios between companies/countries adds value to the customer Current status Shippers are subject to interruption at HAG Buyer s re-nomination on the transmission system Consequence Interrupted gas is transferred onto the balancing market in Austria Risk of selling the gas at a low price in Austria, loss occurs for the trader Transportation is not achieved, trader has to find another solution in Hungary Possible Solution Gas is is injected transfered to the 7 Fields onto the storage balancing facility market and the same amount is withdrawn by E.ON Földgáz Storage (EFS) 7 Fields HAG EFS Despite Gas the HAG interruption, transmission gas can mismatch be transported from Austria to Hungary 12

13 Agenda Added value of gas storage in the gas supply chain Regional storage market Future challenges and innovation in the storage industry 13

14 Challenges faced by market players, require complex solutions Key elements of a well-functioning storage market Regulation Regulation Stable regulatory environment on the long term Separation of commercial and strategic storage facilities Sales Innovation & market intelligence Broadening the scope of offered storage services Building customer relations nationally and internationally Technical development Providing the technology to meet customer needs for shortterm flexibility Off seasonality Energy storage for power-to-gas 14

15 Product developments to serve the regional market needs E.ON Földgáz Storage s product portfolio Consultancy Flat curve Long-term products Standard seasonal product Conventional/ existing EFS products Pay for option HUB products Industrial backup Shortterm products The future of natural gas storage? Customs free storage CEGH flexibility Portfolio separation Peak+ Adapting to changing market needs by broadening the scope of offered storage services 15

16 Gas storage is the key element in tomorrow s supply system Wind Power grid Gas to Power Power to Gas (storage) Gas Grid Underground Gas Storage Sun Nuclear Coal fired power plant CCGT Biogas Electrolytic H 2 production H 2 Methane CH 4 CO 2 Synthetic Gas Gas storage is the only existing high-volume energy storage option that opens the door for power-to-gas and closes the gas-to-power, power-to-gas cycle 16

17 Summary Underground storage plays significant role in the gas value chain Underground storage keeps the leading position in the flexibility market Storage plays a key role in daily and short-term arbitrage deals by generating extrinsic value through fast-churn storage facilities Storage investments are key for security of supply, optimizing and balancing Europe will be even more dependent on imports Investment in new build storage facilities and capacity extensions in Europe are the basis of sustainable, secure and competitive gas supplies Challenges of staying competitive in the regional market Stable regulatory environment on the long term New storage products developed to provide flexibility and serving local hubs Providing the technical background to meet the needs of customers 17

18 Thank you for your attention! Dr Axel Wietfeld