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Notes
- 1.
Source: National Grid website.
- 2.
The collapse in national gas demand during the winter of 2005–2006 has resulted in a reversion of final energy consumption patterns. Since 2005 annual (monthly) demand for gas has returned below 100 Bscm (12 Bscm), with an average reduction by 1.1% year-over-year in the years 2002–2007.
- 3.
Centrica Storage Limited has acquired Rough storage facility from BGS in 2002.
- 4.
Natural gas transmission and storage in Great Britain has evolved from an integrated system operated by British Gas to a market with multiple participants. In 1998, Ofgas (Ofgem, office of the gas and electricity markets, is the successor to Ofgas, office of gas supply) recognized that “British Gas Storage was capable of exercising significant market power” and that “such market power was indeed being exercised in ways that were hindering the development of competition.” In 1999 Ofgas has issued a decision document on storage deregulation, the “Review of the supply of gas storage and related services,” according to which the underground storage facilities owned by British Gas were spun off to a new affiliate, British Gas Storage (BGS), and were removed from the British Gas transporter license.
- 5.
Ofgem can veto any proposed changes to the SSC.
- 6.
The First Gas Directive has been transposed into UK law by the Gas Regulation 2000. The latter has integrated the Gas Act 1986 with sections 19A to 19D.
- 7.
Ofgem may authorize exemptions if the requirements of TPA arrangements were already met and/or if the use of the facility was not necessary for the operation of an economically efficient gas market.
- 8.
First, to put in place a regulated TPA (rTPA) regime, integrations to the Gas Act 1986 (i.e. sections 19A to 19D) have been amended. Second, a distinction in the exemption regime between existing and new (or upgraded) storage facilities has been set up. In particular existing facilities may be TPA exempted if and only if the use of the facility by other person is not necessary for the operation of an economically efficient gas market while new facilities receive the same treatment if either (a) the use by other person is not necessary for the operation of an economically efficient gas market, or the six exemption requirements contained in section 19A(8) of the Gas Act are met (i.e. the facility or the significant increase in its capacity will promote security of supply; the level of risk is such that the investment to construct the facility or to modify the facility to provide for a significant increase in its capacity would not be would not have been made without the exemption; the facility is or is to be owned by a person other than the gas transporter who operates or will operate the pipeline system connected or to be connected to the facility; charges will be levied on users of the facility or the increase in its capacity; the exemption will not be detrimental to competition, the operation of an economically efficient gas market or the efficient functioning of the pipeline system connected or to be connected to the facility; and the Commission of the European Communities is or will be content with the exemption.
- 9.
Differences in SBU are due to facility's technical parameters.
- 10.
Comments from Ofgem: November 2005 “Gas storage was used heavily because beach (UK and Norwegian offshore gas) supplies, Interconnector and Isle of Grain were not delivering the expected amount of gas”; February 2006 “Rough gas storage facility was closed following a fire on February. The market responded with increasing supplies, particularly from the Interconnector”.
- 11.
Since disruption risk linked with terrorist attack, civil war or pipeline breakdown can reasonably be seen as independent of accumulated reserves. Teisberg (1981) considers the deterrence effect of having sufficient reserves. However, the specification is given a priori and not founded on an explicit game between producer countries and the US.
- 12.
This modeling is rationalizable with agents maximizing intertemporal utility or profit, provided objectives are time separable and quasi-linear. For a full justification, see Appendix 5.9.3 where surpluses are calculated.
- 13.
A more general structure with injection and withdrawal costs and limited storage capacity is discussed in Appendix 5.9.4.
- 14.
As Wright and Williams (1982) put it: “the oil industry has abundant reason to believe that there is some oil price at which Government will intervene to control the realizations of oil drawn down from private storage in times of shortage, when profit-maximizing private storers and importers may well be branded as “speculators” or “price gougers”. In fact, it may well be impossible for any administration credibly to guarantee against such action by itself or its successors.”
- 15.
An alternative view is the following, described, for trade policy, in the lobby model of Grossman and Helpman (1994). Storers, requiring protection of their industry interest, can make implicit offers to the Government. The Government maximizes the sum of voters' welfare and total contributions from storers. A full-fledged version of this approach is beyond our scope.
- 16.
The limit stock is
$$S^{\ast }=\frac{bc+ar}{r^{2}}\ln \left[ \frac{\lambda}{r+\lambda }\frac{rp_{C}^{\ast }+c}{rp_{A}^{\ast }+c}\right] + \frac{b}{r}\left( \left( \frac{r+\lambda }{\lambda}p_{A}^{\ast }+c\right) -p_{C}^{\ast }\right).$$((5.19))The expression for D* involves Lambert's W function, the inverse of f(w) = we w.
- 17.
Time unit is the year, prices are in £/therm and quantities in billion therm.
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Cretì, A., Villeneuve, B. (2009). Gas Storage and Security of Supply. In: Cretì, A. (eds) The Economics of Natural Gas Storage. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-79407-3_5
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