German grid operators' association FNB Gas has proposed replacing national storage targets with a state reserve and a requirement for firms with protected consumers to store a certain amount of their gas.
In its winter retrospective published today, the association said that while Germany's binding fill level targets on 1 November had secured supply during the energy crisis in 2022, they led to market distortions this past winter. Lowering gas storage targets "in good time" makes sense "in the short term" but the government must implement a longer-term solution, FNB Gas managing director Barbara Fischer said.
FNB Gas favours a combined model with greater involvement and responsibility from the market. Two instruments could be used to ensure security of supply — a strategic reserve managed by market area manager THE and an obligation for suppliers to store gas for protected end consumers.
The association proposes using balancing group managers to cover the amounts of gas needed for an unusually high-demand 30-day period from residential and commercial consumers. About 43TWh of gas would need to be in storage to cover protected customers for such a 30-day period, and would have to be available throughout the winter. Balancing group managers could then pass on these costs to other potential suppliers if needed with bilateral contracts.
And the association suggests a 16TWh state reserve, equivalent to 6.5pc of German storage capacity, which could cover a two-thirds reduction of Norwegian imports for 20 days. In the most extreme scenario, 55.4TWh would be needed to mitigate a complete disruption of Norwegian flows for 45 days. This reserve would still be lower than in many other European countries, FNB Gas pointed out. In Italy, about a quarter of capacity is used for the state reserve, and in Austria about a fifth.
The association hopes the combination of the two measures would result in the market providing security of supply from storage rather than the state, which could eliminate market distortions such as this winter.
There may be political scope for such a move. In the coalition agreement signed last month, the parties said they plan to introduce "suitable instruments" to ensure gas storage filling and safeguard security of supply in a "more cost-effective" way. While the government has said it wants to abolish the gas storage levy, there is no detail so far on the preferred gas storage strategy of the incoming government.
