Brussels, 27 April 2022
In many EU Member States, underground storage regulation objectively articulates market and system value, albeit according to different orientations. The purpose is to simultaneously provide services fit for users’ needs and to ensure security of supply. In its new Reflection Paper on Regulation of Long-Term Energy Storage from a Sector-Coupling Perspective: Lessons from gas storage, CEER assesses the possible regulatory aspects for underground gas storage to help address issues regulators or policymakers may be confronted with during the decarbonisation process.
The paper highlights that regulatory intervention should be appreciated according to several dimensions including technological options (decentralised vs. centralised techniques, contestability), business models (role of storage in terms of business strategies and system management) and security of supply (investment planning and corrections of misalignments between individual decisions and collective needs). Based on the lessons from gas storage, European energy regulators draw the following conclusions:
- Long-term planning: Storage needs and means should be integrated into the network planning process, based on scenarios that incorporate assumptions on supply and demand profiles as well as the expected level of supply reliability.
- Existing assets as a lever for RES development: Gas storage is a transitional lever to maximise the use of renewable energies by avoiding conversion losses. This is done by relying on existing gas facilities to maintain a high level of security of supply and gradually substitute natural gas by decarbonised solutions.
- Identifying the relevance of regulation: Energy storage may be regulated in case there is a risk that individual decisions do not lead to appropriate capacities or volumes of stored energy. If energy storage facilities are centrally managed, then third-party access or storage services might be put in place.
- Storage support to competition: With the development of intermittency, storage can be of renewed importance for suppliers in terms of competition. In terms of market players’ competitiveness, access to storage may be needed to preserve a level playing field in supply.
- Measures specifically dedicated to security of supply: If there is a risk of undersizing or insufficient energy storage, then strategic storage or guarantees of a minimum level of storage can be put in place. Allocating capacity at market value via well-designed auctions can also promote high volumes of stored energy and complete cost recovery from consumers.
- Dynamic approach to regulation: In light of the uncertainty affecting future developments in the European energy system, regulators advocate for a dynamic approach to regulation. This would allow the regulatory framework to be adapted to market circumstances and industry needs.