Costs and effects of the current German regulatory framework for natural gas storage facilities: a contribution to the German gas market design discussion

The views expressed in this study are the views of the author only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees or its clients.

Compass Lexecon provided economic support to German utility Uniper in the context of the discussion regarding the future design of the German gas market model and storage regulatory policy and possible ways to internalise security of supply considerations. We reviewed the current regulatory framework for gas storage in Germany, and we produced a comparative study of the German and French regulatory models for gas storage facilities.

Situation

Particularly since the 2022 European energy crisis, conditions on the German gas storage market have changed significantly. Reduced German capacity for gas imports and the increasing integration of European gas markets have increased the importance of availability and filling of German gas storage facilities. At the same time, there is an increased risk of inadequate storage filling levels following a decline in bookings for long-term storage capacity and the withdrawal of key market participants. This has intensified the debate in Germany on how to update the gas market model with respect to gas storages and their role in security of supply.

Our role

In this study, we analyse the cost and impact of the current German regulatory framework for gas storage against the backdrop of a fundamentally transformed gas storage market following the 2022 energy crisis. We then compare the German case with experiences from the gas storage model in France.

Specifically, our analysis of the current German regulatory and market environment focuses on:

• the critical role of gas storage facilities in the German energy system;
• how the market environment has changed during and since the energy crisis;
• the economic fundamentals of gas storage commercialisation; and
• the limitations of market price signals to internalise security of supply considerations;

Our analysis of the German and French regulatory frameworks evaluates:

• core principles of regulating storage infrastructure and filling;
• historical costs of storage interventions during both crisis situations and normal operations;
• the impact on security of supply, in particular the effectiveness of filling incentives and the impact on the long-term availability of storage infrastructure for a resilient energy system.

Outcome

The study provides German stakeholders with a fact-based economic analysis of the current German gas storage market model and an alternative to this model. The study thereby contributes to the ongoing discussion regarding the update of the gas market model.

The Team

The team from our EMEA Energy Practice in the Paris and Berlin offices was led by Gerald Aue.

View the executive summary of the study here.

Please reach out to Gerald Aue if you are interested in reading the full version of the study.