Spillovers of underground gas storage facilities and their role in the sustainable energy markets: assessment and policy recommendations

Abstract

Purpose

The purpose of this study is to investigate the impact of the construction and operation of underground gas storage (UGS) facilities, under the prism of the recent rise in energy prices. The focus is on developing energy markets interconnected with gas producers through pipelines and has access to liquefied natural gas (LNG) facilities in parallel.

Design/methodology/approach

Through a focal market in Europe, the authors estimate the economic value for both stakeholders and consumers by introducing a methodology, appropriately adjusted to the specificities of the domestic energy market. The Transmission System Operator, the Energy Market Regulator, the Energy Exchange and Eurostat are the main data sources for our calculations and conclusions.

Findings

The authors investigate the perspectives of UGS facilities, identifying financial challenges considering specific energy market conditions which are barriers to new storage facilities. Nevertheless, the energy price rocketing coupled with the security of gas supply issues, which arose in autumn 2021 and were continuing in 2022 due to the Russia–Ukraine crisis, highlight that gas storage remains, at least for the midterm, at the core of European priorities.

Originality/value

The paper emphasizes on developing markets toward green transition, proposing tangible policy recommendations regarding gas storage. A new methodological approach is proposed, appropriate to quantify the economic value of UGSs in such markets. Last, a mix of energy policy options is suggested which include regulatory reforms, support schemes and new energy infrastructures that could make the gas storage investments economically viable.

Citation

Chrysochoou, A., Zissis, D., Chalvatzis, K. and Andriosopoulos, K. (2024), "Spillovers of underground gas storage facilities and their role in the sustainable energy markets: assessment and policy recommendations", Benchmarking: An International Journal, Vol. 31 No. 2, pp. 391-409. https://doi.org/10.1108/BIJ-01-2022-0024