What is Gasunie’s role in gas storage in the Netherlands?
Knowledge blog
Natural gas is always available. When people turn a knob on their hob or put their thermostat higher, they immediately get gas to supply heat. This is always the case. In order to guarantee that security of supply, even if national gas extraction is reduced further or if import stops, a lot of natural gas is stored in the Netherlands. How does gas storage work in the Netherlands? And what is Gasunie’s role in those gas storage facilities? Some questions and answers.
Why do we have gas storage facilities?
They are needed because the demand for natural gas is twice as high during the six winter months, between October and March, as it is during the six summer months. This is because the Netherlands needs a lot of gas in winter for heating purposes, and very little in summer. In order to meet that higher demand in winter, we need to have gas reserves. Empty gas fields are used for this seasonal storage.
In order to absorb periods of high and low gas demand during the day, we use natural gas stored in underground salt caverns. When everyone turns on their central heating in the morning, or if the wind drops and gas-fired power stations need to produce electricity quickly, additional gas is taken from these salt caverns.
How many storage facilities are there, and how much gas can they hold?
There are four empty gas fields in the Netherlands that are used for gas storage. These gas fields are located in Norg, Grijpskerk, Alkmaar and Bergermeer. We also have six salt caverns near Zuidwending that are used to store gas. We can store a total of 13 bcm of natural gas in the Netherlands. If I tell you that annual consumption is just over 30 bcm, you could say that this capacity is more than enough for the Netherlands.
But gas storage in the Netherlands is not just for the Netherlands. We operate on an international gas market. Not all countries have suitable subsoil for storing natural gas. Belgium, for example, has almost no options for gas storage. Germany, on the other hand, does.
The government demands that Dutch gas storage facilities are at least 80% full at the start of winter, on 1 November. Why is this?
This is required because we need that additional gas buffer in winter. The domestic production we still have, combined with the supply of gas through pipelines and the import of liquefied gas, is not enough to meet our demand. If we didn’t have the storage facilities, we wouldn’t have enough gas in winter.
Who determines how full the gas storage facilities need to be in winter?
The Ministry of Climate Policy and Green Growth determines this. Gasunie advises the Minister on this matter, using the data from the coldest winter in the past 30 years. Such a winter requires even more natural gas than usual. If not enough gas can be supplied through pipelines or by importing liquefied gas, we need to get the rest from the storage facilities. By putting all of that in a calculation, you end up with a filling level of 80%.
Who is responsible for filling up the gas storage facilities?
Gasunie is solely responsible for the transport and storage of natural gas. We do not extract gas, do not trade in gas, and are not the owner of the gas storage facilities. As an infrastructure company, we provide the network, but we are not responsible for filling the gas storage facilities.
So who is responsible then? The companies that operate on the free gas market: well-known names such as Vattenfall and Eneco. If you want to supply natural gas to households and businesses in the Netherlands, you need a permit from the regulatory authority, the Authority for Consumers and Markets. You’ll only get this permit if you can also supply gas in winter, and you need to store gas if you want to supply gas in winter. This responsibility is felt in the market.
Is it just energy companies that fill up the gas storage facilities?
No, there are other companies that could do that, such as parties that extract the natural gas and don’t want to sell it until winter.
Companies take on the responsibility of filling up the gas storage facilities, because they wouldn’t get a permit otherwise, but also because it makes them money. It’s very profitable to store gas when it’s cheap – usually during summer – and sell it when the price has gone up again in winter. Should the market fail to store enough gas in summer, so there’s not enough stored gas for the winter, the state-owned company Energie Beheer Nederland (EBN) will take over that role. During the gas crisis in 2022, when the supply of Russian gas stopped due to the war in Ukraine, EBN helped to fill up the gas storage facilities in the Netherlands.
Do energy companies speculate with the gas storage facilities?
The market parties own the gas. They’re free to sell gas from storage if they think that purchasing liquefied gas is too expensive. That’s a consequence of having a free market. If this happens during a mild winter, it won’t be a problem. But if the gas reserves are being emptied quickly and the winter is cold, you could be facing problems.
If reserves drop quickly in winter, greater quantities of gas will have to be purchased in summer to get the storage levels back up to 80% before 1 November. Would that not push the price up?
Yes, that’s true. We should therefore also have a strategic gas reserve, just like we have for petroleum. It means that you’d have to fill up more than 80%. This will provide an additional buffer for when conditions are bad, and it allows you to absorb price fluctuations better.
Do geopolitical developments play a role in this?
Absolutely. We’ve noticed that we need to take increasingly extreme circumstances into account in our scenarios. Take the gas pipeline between Estonia and Finland, for example, which was ruptured by an anchor. Repairing a pipeline like that takes six months. This affects the availability of gas on the European market. It never used to happen, but now we need to take this into account.
As an import region, the Netherlands depends on other power blocs. We live in an era when positions of power are being used. There are many scenarios where energy supply could be at risk. That is why there is also a call for establishing a strategic gas reserve.
The Netherlands is becoming more sustainable, does that not reduce our dependence on gas?
That is a nuanced matter. On the one hand, the role of natural gas is becoming smaller, because we’re using less and less of it. On the other hand, however, the role of gas storage facilities is increasing, as the highs and lows in gas demand are becoming increasingly erratic. When the sun shines and there’s enough wind, we hardly need any natural gas, but when there’s no sunshine or wind, we suddenly need lots of gas. The gas-fired power stations then need to work overtime to supply electricity. So for the time being we’ll need enough well-filled storage facilities, which allow us to absorb the increasingly extreme highs and lows in demand.
But it’s smart to have a strategic gas reserve in any case?
A strategic gas reserve helps us not be too dependent on gas from abroad. And having a strategic gas reserve is important for another reason. Extreme peaks in natural gas demand result in correspondingly large price fluctuations. When demand for gas shoots up and suppliers are having difficulty meeting this demand, prices will shoot up too. In politics and in society as a whole, the affordability of the energy supply has become a very important topic. During the 2022 gas crisis, people had to turn off their heating and had to suffer the cold due to the high prices. We obviously want to prevent this. Setting up a strategic gas reserve helps to dampen these peaks in prices and keep energy affordable.