Table of Contents
Preface and acknowledgements …………………………………………………………. xv
1 Introduction ………………………………………………………………………………….. 1
1.1 Problem statement ……………………………………………………………………………………… 1
1.2 Research subject: the regulation of gas infrastructure expansion ………………………. 4
1.3 Relevance …………………………………………………………………………………………………. 6
1.3.1 Social relevance ……………………………………………………………………………….. 6
1.3.2 Scientific relevance ………………………………………………………………………….. 7
1.4 Research objective and questions …………………………………………………………………. 8
1.5 Research scope and assumptions ………………………………………………………………….. 8
1.6 Research method ………………………………………………………………………………………. 10
1.7 Structure of this study ……………………………………………………………………………….. 12
2 Background ………………………………………………………………………………… 15
2.1 Introduction to the gas value chain and its actors ………………………………………….. 15
2.2 European gas market developments ……………………………………………………………. 19
2.3 EU gas market regulation ………………………………………………………………………….. 25
3 Research approach ……………………………………………………………………….. 31
3.1 Introduction to the conceptual framework for analysis ………………………………….. 31
3.2 Factors affecting investment ………………………………………………………………………. 33
3.2.1 Private barriers to investment …………………………………………………………… 34
3.2.2 Type and degree of competition ……………………………………………………….. 39
3.2.3 Need for coordination with other gas infrastructure investments …………… 44
3.2.4 External effects on the commodity market for gas ………………………………. 47
3.3 Trade-offs between regulatory objectives …………………………………………………….. 49
3.4 Regulatory models ……………………………………………………………………………………. 52
3.4.1 Contestable market expansion ………………………………………………………….. 53
3.4.2 Unregulated competitive expansion ………………………………………………….. 56
3.4.3 Expansion via tendering ………………………………………………………………….. 58
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3.4.4 Regulated expansion……………………………………………………………………….. 62
3.5 Case study approach …………………………………………………………………………………. 65
3.5.1 Theoretical framework ……………………………………………………………………. 65
3.5.2 Why a case study approach?…………………………………………………………….. 66
3.5.3 Case study framework …………………………………………………………………….. 68
4 Case 1: The Netherlands-United Kingdom pipeline interconnection ….. 75
4.1 Introduction …………………………………………………………………………………………….. 75
4.2 Description of the project ………………………………………………………………………….. 76
4.2.1 Technical features of the project ………………………………………………………. 76
4.2.2 Motivation for the investment ………………………………………………………….. 77
4.2.3 Actors …………………………………………………………………………………………… 79
4.3 Description of the regulatory framework and regulatory choices …………………….. 81
4.3.1 Introduction …………………………………………………………………………………… 81
4.3.2 Application of EU exemption regulation to the BBL project ………………… 82
4.3.3 Summary of regulatory choices ………………………………………………………… 90
4.4 Analysis of the case study project ……………………………………………………………….. 90
4.4.1 Introduction …………………………………………………………………………………… 90
4.4.2 Description of investment project characteristics ………………………………… 91
4.4.3 Analysis of the regulatory model ……………………………………………………… 95
4.4.4 Analysis of alternative regulatory models ………………………………………… 103
4.5 Conclusions …………………………………………………………………………………………… 106
5 Case 2: The Milford Haven pipeline …………………………………………….. 109
5.1 Introduction …………………………………………………………………………………………… 109
5.2 Description of the project ………………………………………………………………………… 110
5.2.1 Technical features of the project …………………………………………………….. 110
5.2.2 Motivation for the investment ………………………………………………………… 111
5.2.3 Actors …………………………………………………………………………………………. 112
5.3 Description of the regulatory framework and regulatory choices …………………… 112
5.3.1 Gas transmission regulation in the UK …………………………………………….. 113
5.3.2 Application of regulation to the Milford Haven pipeline ……………………. 116
5.3.3 Description of regulatory choices ……………………………………………………. 122
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vii
5.4 Analysis ………………………………………………………………………………………………… 123
5.4.1 Introduction …………………………………………………………………………………. 123
5.4.2 Description of investment project characteristics ………………………………. 123
5.4.3 Analysis of the regulatory model ……………………………………………………. 128
5.4.4 Analysis of alternative regulatory models ………………………………………… 134
5.5 Conclusions …………………………………………………………………………………………… 137
6 Case 3: The Bergermeer gas storage facility ………………………………….. 139
6.1 Introduction …………………………………………………………………………………………… 139
6.2 Description of the project ………………………………………………………………………… 140
6.2.1 Technical features of the project …………………………………………………….. 140
6.2.2 Motivation for the investment ………………………………………………………… 142
6.2.3 Actors …………………………………………………………………………………………. 143
6.3 Description of the regulatory framework and regulatory choices …………………… 144
6.3.1 Gas storage regulation in the EU …………………………………………………….. 144
6.3.2 Gas storage regulation in the Netherlands ………………………………………… 145
6.3.3 Application of regulation to Bergermeer ………………………………………….. 148
6.3.4 Description of regulatory choices ……………………………………………………. 154
6.4 Analysis ………………………………………………………………………………………………… 157
6.4.1 Introduction …………………………………………………………………………………. 157
6.4.2 Description of investment project characteristics ………………………………. 158
6.4.3 Analysis of the regulatory model ……………………………………………………. 162
6.4.4 Analysis of alternative regulatory models ………………………………………… 170
6.5 Conclusions …………………………………………………………………………………………… 173
7 Case 4: The GATE LNG import terminal ……………………………………… 177
7.1 Introduction …………………………………………………………………………………………… 177
7.2 Description of the project ………………………………………………………………………… 178
7.2.1 Technical features of the project …………………………………………………….. 178
7.2.2 Motivation for the investment ………………………………………………………… 179
7.2.3 Actors …………………………………………………………………………………………. 180
7.3 Description of the regulatory framework and regulatory choices …………………… 182
7.3.1 LNG import terminal regulation in the EU ………………………………………. 182
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viii
7.3.2 LNG import terminal regulation in the Netherlands …………………………… 186
7.3.3 Application of regulation to GATE …………………………………………………. 189
7.3.4 Description of regulatory choices ……………………………………………………. 195
7.4 Analysis ………………………………………………………………………………………………… 197
7.4.1 Introduction …………………………………………………………………………………. 197
7.4.2 Description of investment project characteristics ………………………………. 198
7.4.3 Analysis of the regulatory model ……………………………………………………. 203
7.4.4 Analysis of alternative regulatory models ………………………………………… 211
7.5 Conclusions …………………………………………………………………………………………… 212
8 Synthesis …………………………………………………………………………………… 215
8.1 Introduction …………………………………………………………………………………………… 215
8.2 Analysis of different factors affecting investment ……………………………………….. 216
8.2.1 Private barriers to investment …………………………………………………………. 216
8.2.2 Type and degree of competition ……………………………………………………… 224
8.2.3 Need for coordination with other infrastructure ………………………………… 225
8.2.4 External effects on the commodity market ……………………………………….. 227
8.2.5 Conclusions …………………………………………………………………………………. 228
8.3 Analysis of regulatory models ………………………………………………………………….. 230
8.3.1 Regulatory models for gas transmission pipelines …………………………….. 231
8.3.2 Regulatory models for gas storage facilities ……………………………………… 235
8.3.3 Regulatory models for LNG import facilities ……………………………………. 242
8.3.4 Trade-off between economic efficiency and security of gas supply ……… 247
8.3.5 Conclusions …………………………………………………………………………………. 248
8.4 Reflection on regulatory choices at the EU level …………………………………………. 251
8.5 Improving regulation of gas infrastructure expansion ………………………………….. 254
9 Conclusions and reflections ………………………………………………………… 261
9.1 Answers to the research questions …………………………………………………………….. 261
9.2 Recommendations for further research ………………………………………………………. 268
9.3 Reflection on research …………………………………………………………………………….. 269
Glossary ……………………………………………………………………………………….. 273
Contents
ix
Bibliography………………………………………………………………………………….. 277
Summary ………………………………………………………………………………………. 297
Samenvatting …………………………………………………………………………………. 305
Curriculum Vitae……………………………………………………………………………. 315
List of publications…………………………………………………………………………. 317
NGInfra PhD thesis series on infrastructures ……………………………………… 321
Abstract
The topic of this dissertation is the regulation of gas infrastructure expansion in the European Union (EU). While the gas market has been liberalised, the gas infrastructure has largely remained in the regulated domain. However, not necessarily all gas infrastructure facilities – such as gas storage facilities, LNG import terminals and certain gas transmission pipelines – need to be regulated, as there may be scope for competition. In practice, the choice of regulation of gas infrastructure expansion varies among different types of gas infrastructure facilities and across EU Member States. Based on a review of economic literature and on a series of in-depth case studies, this study explains these differences in choices of regulation from differences in policy objectives, differences in local circumstances and differences in the intrinsic characteristics of the infrastructure projects. An important conclusion is that there is potential for a larger role for competition in gas infrastructure expansion.
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