1. Regional Storage Investment Artúr Böröcz Security of Supply Working Group GSE Regulatory Expert, E.ON Földgáz Storage Zrt. ENTSOG Workshop Bruxelles, 22 nd February 2011

2. GSE represents:  33 Storage System Operators  110 storage sites in 16 countries  ≈ 85% of Europe’s technical storage capacity Gas Storage Europe www.gie.eu 2

3. 1.Market challenges and the role of natural gas storage Gas storages significantly increase the SoS Factors that determine storage investments 2. 5. Potential cooperation between SSOs and TSOs6. Agenda 3 3.Storage as a commercial tool 4.The future of UGS: energy storage

4. 1. Market challenges and the role of gas storage Reduce greenhouse gas emissions Secure energy supplies Energy affordability Sustainability Local storage helps to manage temporary supply chain disruptions and LNG transit times Gas storage protects customers from excessive short-term market price volatility, while the global demand for gas is increasing Gas storage allows for optimisation of gas purchase decisions and helps to keep the competitivness of gas I II III III III Role of gas storage Utilising expertise in storage to store energy and to balance volatility of renewable energy supply via CCGT flexibility IV Market challenges IV 4

5. Austria Belgium, Portugal, Switzerland Bulgaria Hungary Ireland Italy Netherlands Poland Romania Slovakia Spain United-Kingdom Denmark Czech Republic Estonia, Finland, Lithuania, Lux. 0% 10% 20% 30% 40% 50% 0%20%40%60%80%100% Imports / Demand (%) Storage / Demand (%) EU-27 Storage/Imports = 25% EU-27 2020e EU-27 2030e Germany France Source: SG Equity Research / Eurogas / GSE 2008 2. Gas storages significantly increase the security of supply Security of Supply Flexibility 5

6. 3. Storage as a commercial tool Type of spreadExampleInstrument used TimeBuy in summer Sell in winterStorage Cross RegionalBuy at NBPSell at TTFInterconnectors Cross GlobalBuy at Henry HubSell at NBPLNG Cross CommodityBuy at TTFSell at APXPower station Storage is complementary to LNG in trading as it allows to exploit a different type of spread New storage products allow traders to gain higher flexibility and thus better exploit time spreads. E.ON Gas Storage examples: Day aheadDay ahead trade of withdrawal and injection services (Germany) EFS +Withdrawal in summer period and injection in winter (Hungary) 6

7. 4. UGS has a key role in the intelligent energy supply concept Share of fluctuating renewable energy is increasing Base load from conventional sources Additional “smart” grids Energy storage (power/gas/hydrogen) Demand Additional peak supply from gas power plants 7

8. Powergrid H2H2 Gas to Power Storage of Power Gasgrid Electrolysis/ H 2 CO2 separation CH 4 Methan Wind Sun CCGT/ BHKW Underground Gas Storage Synthetic Gas „ POWER TO GAS AND GAS TO POWER“ 4. Future concept of integrated energy storage Coal fired power plant Nuclear

9. 5. Factors that determine storage investments 2010 87*** 2015 104 17 132- 156 2025 2020 15-27 119-131 17 OECD Europe 30 * additional projects under consideration * GSE publication (2010) Expected European storage capacity [bcm] 9 Appropriate regulatory framework is an essential condition of investments in gas storages - strategic storage is definitely damaging - choice of access regime should be market- oriented - negotiated TPA should be the preferred choice wherever market conditions allow :  best regime to facilitate investments  best regime to foster commercial creativity and provide best response to the demand

10. 10 6. Potential cooperation between SSOs and TSOs Harmonizing measurement units Gas quality Network Code Products with reasonable cross boarder fees Common dialogue with decision makers To aim at win- win position in regional sales