Our gas transport and infrastructure activities are at the heart of our strategy, and we carry out these activities as efficiently as possible. We take care of the development of the gas transport network and ensure that it is functioning well. We do this by guaranteeing transport security and offering relevant services to our customers. Safety, reliability, sustainability and cost-effectiveness are central in everything we do.
We achieved a high degree of transport security in 2018. There was one brief disruption in the gas supply in the Netherlands, which meant that approximately 2,200 domestic households were temporarily without gas. We investigated the causes of this transport disruption and concluded that the procedures are adequate and that the particular disruption was due to human error.
The total volume of natural gas transported in the Netherlands in 2018 decreased by 2.2%. This decline was mainly due to the low volume of high-calorific gas transported abroad in the last two months of 2018. Our customers transported 939 TWh (96.1 billion m3) of gas through our networks to end users in the Netherlands and abroad. That was 960 TWh (98.2 billion m3) in 2017. The mean temperature in 2018 was 0.4°C, higher than the year before, but because there were several relatively cold periods in February and March for the time of the year, the volume of low-calorific gas transported remained the same as in 2017.
To mitigate the consequences of the reduced gas production from the Groningen gas field, the use of our quality conversion further increased. Quality conversion refers to the mixing of high-calorific H-gas with nitrogen, resulting in a quality comparable to that of low-calorific (Groningen) G-gas. This quality conversion is playing a growing role in meeting the demand for low-calorific gas. The amount of converted high-calorific gas increased in 2018 by more than 12%, from 25.8 billion m3 (286 TWh) in 2017 to 28.9 billion m3 (324 TWh) in 2018.
The volume of nitrogen used increased from 1.85 billion m3 to 2.53 billion m3 in 2018. The utilisation of our nitrogen installations therefore increased from 64% in 2017 to 88% in 2018.
The volume of high-calorific gas imported from foreign sources rose sharply compared to 2017. This was due to the greater need for high-calorific gas for the growing use of quality conversion, while at the same time the production from small domestic high-calorific fields decreased. The supply of high-calorific gas from abroad increased by 19% to 39.3 billion m3, while the LNG supply almost tripled to 2.5 billion m3.
Peak supply is an important public task carried out by GTS for small users in the Netherlands. Peak deliveries are necessary if the mean effective 24-hour temperature falls to below –9.0 °C. GTS provides all the necessary facilities to ensure peak delivery to licence holders, including gas purchasing, flexibility services and gas transport over the national gas transport network. In 2018, peak delivery took place on 4 days, with 181,635 kWh of gas being supplied to households.
Gasunie Transport Services B.V. (GTS B.V.) merged with Gasunie Grid Services B.V. (GGS B.V.) on 2 January 2018. GTS remains the national network operator for both the main transport network and the distribution transport network.
Gasunie Deutschland's total transported volume of gas in 2018 was 197 TWh (2017: 253 TWh). This decrease was mainly due to the fact that less gas was fed in from the North Sea last year as well. Less gas also entered at various border points, such as Greifswald, Oude Statenzijl and Emden, since during the summer months, demand on the German low-calorific gas market was almost entirely satisfied by domestic production and demand on the high-calorific gas market was largely satisfied by gas from Russia. On balance, the revenues from the sale of transport capacity in 2018 were 8.4% lower than planned. These differences will be settled in future rates.
This year, at the Ministry of Economic Affairs and Climate's request in response to the Zeerijp earthquake on 8 January 2018, we carried out a security of supply analysis, in which we considered the potential impact of a lower extraction rate in Groningen on the security of supply.
In addition, GTS conducted a scenario study in which we advised the Ministry on how, from the perspective of security of supply, gas extraction in Groningen can be reduced as quickly as possible to an initial target of 12 billion cubic metres (12 bcm) per year, and subsequently to 0.
Zuidbroek nitrogen installation with a possible reduction of 7 bcm in a cold year.
Conversion of major industrial users. This can lead to a reduction of 2.3 to 3.5 bcm.
Additional nitrogen purchases for a saving of 1 to 1.5 bcm.
The advice to conduct a study jointly with NAM into filling USG Norg with pseudo-Groningen gas (converted high-calorific gas).
In November, we updated the Ministry on progress with these and other identified measures. The measures are well on course, which means that the Groningen production can be phased out even faster than indicated in March. This combination of measures means the conversion of industrial users after 2022 will yield no further reduction. With this insight in mind, we expect that the conversion of industrial users to high-calorific gas can be limited to the 9 biggest industrial users.
A new nitrogen installation is being built close to Zuidbroek, with an estimated production capacity of 7 billion m3 of converted high-calorific gas in a cold year, which can serve as a substitute for Groningen gas.
The preparation of the nitrogen installation is on track and the installation should be ready for use from the first quarter of 2022. Once the installation has been commissioned at the start of 2022, production from the Groningen gas field can be reduced by approximately 7 billion m3, meaning that the Ministry's objective of capping Groningen production at 12 billion m3 can be achieved as early as 2022. The necessity and expected benefits of building the nitrogen installation and obtaining the necessary permits will be guaranteed through completion of the relevant 'national coordination scheme' (Rijkscoördinatieregeling, RCR) procedure. The investment was approved in late October, and the contract to build the three air separation installations was awarded in December.
Initial preparatory construction work has already started, including the laying of the access road. We are closely monitoring the risks posed by the protests against the new wind turbines to be built in the immediate surroundings.
To achieve the maximum reduction in Groningen, the nitrogen installation must be utilised to the absolute maximum for the entire year. Since there is insufficient market demand for this in the summer, for a limited investment there are possibilities to fill the (NAM) underground storage in Norg with converted high-calorific gas instead of gas directly from the Groningen field.
Based on initial estimates, this has an effect of up to 3 bcm annually, with which a maximum overall reduction of 10 bcm can be achieved. This measure is being investigated further together with NAM.
This year we worked hard to prepare measures to reduce industrial demand for Groningen gas. The Ministry of Economic Affairs and Climate informed the large industries that they need to convert quickly. If industrial users convert to the use of high-calorific gas, GTS will take appropriate steps to facilitate this.
The conversion option mainly targets bulk gas users who individually purchase more than 100 million cubic metres of gas annually. In total, this entails 9 companies with a collective demand of about 3 billion m3 annually.
Preparations are now fully under way to implement these projects in consultation with the relevant companies, and to complete the conversion to high-calorific gas by no later than the end of 2022. Since October, GTS' quality conversion job has been expanded with the amendment of the Dutch Gas Act in relation to minimising gas extraction from Groningen.
We have agreed with Linde and Tata to purchase additional nitrogen at the rate of 80,000 m3/hour from the start of 2020. The contract for this will be signed in the 1st quarter of 2019. Taking into account the size of the market, we currently estimate that this will result in a reduction of 2.2 to 2.5 bcm in the production required from Groningen.
The Wieringermeer mixing station will have to be expanded and modified before this extra nitrogen can be mixed into our network. The necessary investment decision was made at the end of this year and the modifications are expected to be made in the first quarter of 2020.
Click here for a larger view of the matrix.
The matrix is used to assess the risks per scenario on the level of an asset category. The different company values have been made comparable in monetary terms. Risk-mitigating measures are, in principle, only taken if the costs are significantly lower than the present value of the risk that is mitigated or eliminated.
Major replacement programmes are evaluated annually. In this process, better insight is obtained into the risks that are being reduced (for instance, as a result of the inspection of replaced materials), but also into the costs necessary for this reduction. The programmes are adjusted in response to the findings from the evaluation. We have seen the investments in our replacement and maintenance programme decrease significantly over the past years as a result. The corrective efforts are expected to increase slightly.
For example, the risk-based review has led to the decision to cease all preventive renovation of metering and regulating stations, other than current projects due for completion in 2018. This decision was based on a study into risk-effectiveness, which takes into account the actual state of the replaced components over recent years. This measure results in lower investment costs of around € 11 million per year.
In 2018, we continued the multi-year replacement programme for valves. This also applies to assessment of the condition of the replaced parts. Based on the findings of this study and the corresponding risk assessment, the replacement program has been revised downwards from 100 locations per year to an average of 50 per year for 2019 and 2020. This will realise savings of about € 25 million per year. Priority will be given to the oldest locations (more than 50 years old).
In early July, we started using a new system to control the gas transport network. The new operating system enables us to monitor and predict the transport flows more accurately than in the past, and therefore helps our dispatchers to run the gas transport network as efficiently as possible. The system lays a foundation for potential future optimisations of the network. Examples of this include the further integration of business processes and the management of other energy flows. Implementation of the new system was a large-scale and complex task, which we started in 2015. We have succeeded in implementing and delivering the operating system within the planned lead time and budget.
In the south-western Netherlands, Enexis and Enduris have a number of extra high-pressure networks, including the ZEBRA gas pipeline. A joint feasibility study was carried out with these parties to see whether these networks could become part of the GTS national gas transport network and the TTF market area. The study showed that a transition is currently not feasible.
All Integrated Open Seasons projects have now been completed and are operational. The remaining outstanding items will be finished at the beginning of 2019.
an application for an LNG terminal near Hamburg; this project is described in detail in the Business development results.
a request to increase the transport capacity to the Volkswagen power station in Wolfsburg. The project was approved in the 2018 network development plan (NEP). Gasunie Deutschland is now working on further preparation of the investment decision within Gasunie Deutschland and the necessary documents for getting the planning approved at the end of 2020. This is necessary in order to ensure construction can start in 2021.
an application for the injection of hydrogen into the Deudan pipeline in Schleswig-Holstein.
If the projects go ahead, the LNG project and the expansion of the power station represent a substantial expansion of Gasunie Deutschland's existing network. Both projects have been included in the current national plan for network development, the 2018 Netzentwicklungsplan (NEP) process. Although the injection of hydrogen is a small-scale project, it is seen as an attractive pilot project that can serve as an example in developing hydrogen transport. The German regulator Bundesnetzagentur recently published its decision on the 2018 NEP.
In the second half of 2017, Gasunie Deutschland signed a joint venture agreement with the TSO companies GASCADE, ONTRAS and FLUXYS to build and operate the EUGAL pipeline. Participation in this project constitutes expansion of Gasunie Deutschland's transport capacity, bolstering the position of Gasunie's network in international transit flows. Various branches to the west link the pipeline to gas markets in Germany, the Netherlands, Belgium and the UK. The intention is that the first part should be taken into use from 2020 and that the total capacity should be available in 2021. The construction work started in 2018 and the project is progressing according to plan.
Together with Thyssengas GmbH and TenneT Germany, Gasunie Deutschland announced the plan to develop, build and operate a large 100 MW power-to-gas installation in the area between Bünde and Barßel. There are few power-to-gas installations in operation at this moment, and the few in operation are much smaller, producing just a few MW. The goal of the project partners is to facilitate further development of the technology for large electrically-powered gas installations in Germany, since these installations will be needed in the future. The power-to-gas plant will connect the high-voltage and high-pressure TSO networks and operate under an open-access principle. The next steps in the process are to carry out a technical feasibility study and present the project at conferences and to individual stakeholders.
Germany has started the shift from low-calorific gas to high-calorific gas. This conversion can ensure that transport security is guaranteed and that the gas transport network will continue to be utilised to its fullest potential. The first conversion projects have been completed successfully. During the first half of 2018, an area east of Hanover (Großburgwedel - Peine) was switched to high-calorific gas. The conversion for Bremen started in 2017 and will be completed in 2019.
In addition to the projects already put in motion, the next conversion projects have now been announced and the relevant agreements with the adjacent network operators have been entered into, in line with the ambitious German network development plan (NEP) and the Implementation Plan (USP).
To continue to serve our customers well and to maintain our standing among Europe's best TSOs in the future, our services must meet the needs of our customers, support their business and respond to market developments. This is why we seek contact with our customers, and aim to maintain a dialogue. We highly value the insight into developments in the market that our customers and other stakeholders share with us during various contact moments, as it helps us to better align our services with their needs. We are therefore intensifying the interaction with market parties. We seek out dialogue with customers through customer days, market consultations and other occasions.
In October 2018, we commissioned the two-yearly customer satisfaction survey to find out how customers perceive our performance. Customers appreciate GTS' professionalism and willingness to think and work pro-actively with the customer. This indicates that our dialogue with the market and the developments in our product and service offering meet the needs of our customers.
We are proud that our customers continued to value us highly in 2018. Shippers gave GTS a mark of 8.1 out of 10 (compared to 8.0 in the previous survey in 2016), while industrial customers gave GTS a mark of 7.7 out of 10 (7.7 in 2016). GTS also scored the same as or better than other TSOs.
In the event of questions or complaints, shippers can contact the Customer Desk, and industrial customers can contact the Industry Desk. A specialist team will then help to solve the issue. In this way, GTS provides good accessibility and specialist contact points.
We try to process complaints we receive as quickly as possible, and to the satisfaction of all parties involved. In 2018, we received no complaints from shippers and industrial connected parties. In 2017, there were 2 complaints from shippers and 1 complaint from an industrial party.
The Dutch virtual gas trading platform TTF (Title Transfer Facility) had a good year in 2018. TTF did an excellent job of maintaining its position as the leading liquid gas hub in Europe. This is reflected in the ICIS Heren Tradability Index, which is a measure of the ease with which shippers can buy or sell gas. As the sole gas trading platform, TTF achieved the maximum score, for the 14th time in a row in the 2018 calendar year.
In north-western Europe, more gas was traded in 2018 than in 2017. TTF made a substantial contribution with an annual traded volume of 27,170 TWh. This was significantly more than the volume traded in the 2017 calendar year (20,962 TWh). In 2018, TTF even far surpassed its record in 2016 of 21,468 TWh. The TTF volume is more than 73 times greater than the domestic gas transport volume of 370 TWh. The physical volume flowing through the GTS network via TTF, the net TTF volume, was 564 TWh in 2018, compared to 540 TWh in 2017. This means that, as in previous years, the physical TTF volume is greater than the domestic gas consumption in the Netherlands (around 400 TWh). Both national and foreign parties make use of TTF to fulfil their gas requirements. The highest number of active TTF traders on a single day increased again in 2018 and rose to 159 (151 in 2017).
OTC trade increased sharply in 2018: from 15,592 TWh (in 2017) to 21,250 TWh. The TTF share traded through gas exchanges grew from 5,370 TWh to 5,920 TWh in 2018, i.e. an increase of 10% compared to the previous year, the same percentage as in 2017.
This has helped TTF to expand its lead as Europe's largest gas trading platform. In 2018, 57% of European gas trading took place on TTF, compared with 48% in 2017. This confirms once again that the Dutch gas market is performing well.
In 2018, the volume traded on the virtual gas trading platform GASPOOL increased slightly compared to 2017, to a level of 1,724 TWh (2017: 1,565 TWh).
In February 2018, GASPOOL had to procure almost 35% of the entire amount of low-calorific gas through balancing energy; almost 70% on some days in March 2018. That is why GASPOOL became a kind of single buyer for low-calorific gas in the respective periods. The cold spell during the first quarter of 2018 and the increased demand for low-calorific gas balancing prompted an enormous decline in the financial liquidity of the business.
In order to be prepared for the current/coming winter period, GASPOOL increased the low-calorific gas purchasing portfolio of Flexibility Services and Long-Term Options and also the costs for balancing and conversion services. The aim is to have sufficient financial liquidity. GASPOOL also took out an adequate credit line with a bank.
The next conversion projects have already been announced, and the relevant agreements with the adjacent network operators have been entered into, in line with the ambitious German network development plan (NEP)/Implementation Plan (USP).
A system of revenue regulation applies in the Netherlands, see the description in the business model.
The Dutch Trade and Industry Appeals Tribunal (CBb) found in GTS' favour in its appeal against the original level of two parameters in the method decision. These parameters are the permitted return (WACC) and the annual productivity improvement. After the CBb found in GTS' favour, ACM issued a new method decision.
Based on this new method decision, ACM has set GTS' permitted revenues in the current regulatory period (2017-2021) at a higher level. This increase in permitted revenues will be settled through the future rates in 2020 and 2021.
ACM has now started to prepare for the method decision for the next regulatory period, which starts in 2022. One aspect of these preparations is a study of the utilisation of the gas transport network and the development of GTS transport rates for the coming decades. The results of this study can be incorporated in the next method decision. It is expected that in any future method decision, ACM will also compare GTS' cost efficiency with that of other European gas transport companies (cost benchmarking).
ACM will publish the 2020 rate decision in May 2019. This rate decision assumes an updated rate structure, on which ACM made a final decision in December 2018. This new rate structure stems from European rules aimed at bringing rate calculations in Europe more in line with each other and making them more transparent. A sector-wide agreement on this was signed between ACM, GTS and market parties at the end of last year.
ACM and the Ministry of Economic Affairs must review or approve an investment plan every two years.
Moreover, the Dutch Progress on the Energy Transition Act limits the activities of GTS solely to those necessary for the proper execution of its statutory duties. At the same time, the Dutch Progress on the Energy Transition Act aims to create room to perform additional activities by means of temporary tasks, and to obtain exemptions from certain articles of law through experiments.
At the end of the second quarter of 2016, Gasunie Deutschland submitted a cost base to Bundesnetzagentur for the new 2018-2022 regulatory period. This consisted of a cost estimate and 2 preliminary parameters: Return on equity (ROE) and the collective efficiency discount X-gen. Gasunie Deutschland had filed a complaint about the amount of the preliminary parameters and, together with other market parties, started a court case.
The German regulatory authority uses a benchmark to determine the individual efficiency of the network operators: Gasunie Deutschland's individual efficiency was confirmed to be at 100%. The entire process for determining the permitted revenues for the 2018-2022 regulatory period has almost been concluded. On 20 June 2018, Gasunie Deutschland received the final decision from Bundesnetzagentur. The cost estimate was approved and has been adopted. The 2 parameters (ROE and X-gen) have not yet been finalised. Both of the appeals against these parameters will be concluded in 2019 at the earliest.
Preparations are under way for the introduction of a new rate structure in Germany. This structure is an elaboration of European rules aimed at bringing rate calculations in Europe more in line with each other and making them more transparent. The new rate structure will take effect from 1 January 2020. German regulatory authority Bundesnetzagentur opted to introduce a uniform rate. This means that the same transport rate will be paid throughout Germany for introducing gas into the network and an equal transport rate will apply for withdrawing gas from it as well. This makes transport rates much more transparent.
On 15 October 2018, the Federal Ministry of Economic Affairs published a draft bill incorporating changes to the incentive regulation (ARegV). The provisions from the draft regulation mentioned above could make changes to the investment framework for gas transmission network operators. This mainly concerns limiting the IMA approvals to a single regulatory period, the change in the fixed amount of operating costs and the different determination of the phases before and after completion of a project, the deduction of the company's own capitalised hours and possibly the (partial) retroactive application of the changes. The current draft means more bureaucracy and legal uncertainty and would significantly worsen the economic framework for upcoming investment projects.
TSOs cooperate in various areas. The goal is to encourage the development of a competitive, reliable and increasingly sustainable European gas market, and to promote market liquidity. One context in which this collaboration takes place is ENTSOG, the European Network of Transmission System Operators for Gas, of which both GTS and Gasunie Deutschland are members. Within ENTSOG, network operators work on matters such as drawing up and implementing European network codes, the ten-year network development plan and the promotion of transparency. En route towards a reliable and affordable CO2-neutral energy supply, ENTSOG regards existing infrastructures (both gas and electricity) as an essential bridge for the energy transition. In the next network development plan, ENTSOG is therefore working more closely with ENTSOE (European Network of Transmission System Operators for Electricity) to develop shared scenarios that take climate goals into account. The power-to-gas technology will play a key role in linking the two infrastructures.
With this hybrid approach, we continue to utilise our infrastructure to maximum efficiency, and maintain its value in an increasingly international energy world.
The BBL pipeline became part of the TTF market area on 1 January 2018. The elimination of the Julianadorp interconnection point has created a direct connection between Europe's two most liquid hubs: TTF and NBP. This enables shippers to respond better to arbitrage opportunities and promotes liquidity on TTF. Once BBL Company has completed its reverse flow project, expected in the second half of 2019, physical flow from England to the Netherlands will also be possible.
By harmonising gas transport services, the thresholds for customers (particularly international customers) are kept as low as possible, enhancing cross-border gas trade. In 2018, GTS and Gasunie Deutschland continued their efforts to co-design new European network codes, in particular those for rate structures.
Based on non-committal shipper requests, extra entry capacity at the border between Russia and GASPOOL and extra capacity at the border between GASPOOL and GTS, towards the Netherlands, was identified. Initial technical studies were carried out and the results were published in the context of the consultation process. The feedback from the shippers and other market participants will be analysed and the respective bid levels for extra incremental capacity will be offered in the upcoming auction for annual capacity.
Furthermore, GTS, Gasunie Deutschland and other German TSOs started cooperating in 2017 to implement "Virtual Interconnection Points" (VIPs) on the Dutch/German border as laid down in the NC CAM. According to the NC CAM, the TSOs had to establish VIPs at cross-border points before 1 November 2018. However, legal uncertainties have caused a delay in the implementation of the VIPs at the Dutch/German border, and this is now expected to take place in early 2020.
In 2018, Gasunie Deutschland worked with all the other German TSOs to set up the project to combine the two German market areas into just one. The market areas will be merged before 1 October 2021.
The Dutch energy policy aims to achieve a CO2-neutral energy supply by 2050. With our infrastructure, knowledge and experience, we at GTS constantly provide added value to the energy supply of the future. We are cooperating with many parties to realise sustainable, affordable and reliable solutions. We do this by developing a long-term vision, and by taking and supporting various initiatives.
Green gas has great potential in the Netherlands: at least 1 billion m3 in 2023 and 3 billion m3 in 2030. With an investment of € 300 million in the gas networks, the network operators can make it possible to inject 3 billion m3 of green gas into the network by 2030. We are prepared to make this investment together with the regional network operators. We are working together to create a single 'green gas desk', and we apply a common assessment framework for realising the overall best solution for green gas injection. We are now realising four new injection points for green gas, alongside our single existing injection point. Furthermore, we will start using our first green gas booster in Drenthe over the course of the summer of 2019, which will be used to inject green gas from the regional network into our national grid.
At the request of several biogas producers, we are investigating whether the GZI pipeline from Emmen to Ommen can be used as a biogas collection pipeline. It may be possible for us to blend this gas in Ommen to on-spec gas – an interesting and efficient concept for green gas injection.
More than 2 million homes with a hybrid heat pump can be heated by 1 bcm of green gas. We have encouraged the roll-out of the hybrid heat pump, for example by giving a boost to the development of a national training programme on sustainable heating technologies for installers. In June, Minister Wiebes opened the first training centre in Groningen. There will be seven training centres throughout the country, most of which have already opened.
In November, Gasunie's 12 km hydrogen pipeline between chemical company Dow Benelux and fertiliser producer Yara came into use. This is the first time that an existing main transport pipeline has been made suitable for the transport of hydrogen. In May 2018, this pipeline was transferred from GTS to Gasunie Waterstof Services B.V. Both the activity and the associated gas transport pipeline have been transferred, and they are now outside the statutory scope of GTS' operations.
Over the next few months, we will establish what is needed to make part of our infrastructure suitable for a hydrogen network. We are also exploring other options for the transport of sustainable gases, such as the blending of hydrogen into natural gas.
Infrastructure plays a linking and facilitating role. It is the key to a successful and efficient energy transition. Together with TenneT, we have surveyed developments in the gas and electricity infrastructure in the Netherlands and Germany up to 2050 and come up with the 2050 Infrastructure Outlook. We have identified the consequences for the energy networks for several 'Grid of the Future' scenarios. The survey shows further system integration between the electricity and gas transport networks is necessary in order to create a sustainable energy supply. Hydrogen is expected to play a key role in keeping the future energy supply reliable and affordable. As national network operators, we invite cooperation with the other network operators to periodically perform a comprehensive infrastructure survey.
We contribute to the Sustainable Development Goals based on our material theme of 'Transport security'.