Gas Storage
Every year, the Netherlands fills its underground gas storage facilities, but at the start of winter it has to sell that gas on to neighbouring countries at a loss.
And Dutch taxpayers foot the bill. How does this complicated gas arrangement work? One thing is clear: the gas market has changed completely.
The problem is clear, but the details are complicated: Europe wants member states to fill their gas storage facilities well before winter begins to prevent shortages.
Because the Netherlands has vast, depleted underground gas fields, it has plenty of storage capacity. Gas intended for neighbouring countries without this space therefore also ends up in Dutch storage facilities. But Dutch taxpayers are left to pay the bill.
The reason is that the requirement is based not on how much gas a country needs for itself in winter, but on how much storage capacity it has underground. The Netherlands has plenty of space, so it has to store a relatively large amount of gas.
“The European Commission imposes these filling requirements,” René Peters, TNO’s business director for energy infrastructure, recently told the Dutch radio programme EenVandaag. “Like other member states, the Netherlands has to fill its storage facilities to 80 percent. That means we fill part of our extensive storage capacity to help ensure the security of gas supplies throughout Europe.”
In the past, this was not a problem: energy suppliers bought cheap gas in the spring, stored it underground and sold it on at a profit during the cold winter. “But the international gas market has changed completely,” Peters said. “These days, gas is sometimes even more expensive in summer than in winter.”
As a result, storing gas has become unprofitable for commercial energy companies. Because Europe still requires storage facilities to be full, the Dutch government has taken on the task. It does so through the state-owned company Energie Beheer Nederland (EBN), with subsidies from the public purse.
“Commercial companies used to ensure that there was enough gas in storage during the winter, but now you can see that this task is falling entirely to the government,” said Stientje van Veldhoven, Minister for Climate and Green Growth. “The state-owned gas company is now replenishing the stocks, which means the bill falls to taxpayers. I would like companies to take on more of that responsibility again.”
“We need to have enough gas in Europe,” Van Veldhoven stressed. “That is why the European Commission looks at which countries have which storage facilities and then decides how much gas must be stored. But for the Netherlands, it means we have to store far more than is reasonable in relation to what we need ourselves in winter. So, in effect, we are paying for other countries.”
According to energy expert Peters, the Netherlands is caught between European regulations and the commercial market. “Our government is now saying: why should we pay 1 billion to store gas in these facilities when we are not doing it solely for the Netherlands? The entire European market benefits, because other countries buy that gas from us in winter.” In his view, the government therefore sees this as advancing the money for a market that will ultimately buy the gas back, but not at a suitable price.
How can the Netherlands get out of this situation? “First, Europe must stop looking at a country’s storage capacity and pay more attention to its actual demand for gas,” Minister Van Veldhoven argued. “If Portugal or Germany wants gas reserved for it underground in the Netherlands, its taxpayers should also contribute. The bill needs to be shared more fairly across Europe.”
Second, commercial energy suppliers should be legally required to store some of the gas they promise their customers physically in the Netherlands, she said.
But Peters warned during the radio programme that this would have consequences for the public. “The industry will say: you are imposing costs on us. We have a supply contract for that gas, and now you are requiring us to store it in those facilities.” Peters believes energy companies will pass these costs on to consumers.
Even so, the Dutch minister wants to take action. The European rules should be changed so that the Netherlands no longer pays a disproportionate amount. In her view, companies as well as taxpayers in the Netherlands should once again take responsibility.
“Then the government can focus again on its real responsibility: making sure we have enough gas in a crisis, a strategic reserve. At present, all these things are being mixed, and that is why Dutch taxpayers are paying too much.”
