Oil, Gas and Energy Law Intelligence (OGEL, ISSN 1875-418X, www.ogel.org) invites submissions for a Special issue focusing on laws and policies relating to energy storage. The editors for this issue are Thomas J. Dimitroff, Senior Advisor, Global Infrastructure & Civil Economics, Roland Berger, GmbH; Partner at Infrastructure Development Partnership LLP and Professor Kim Talus, James McCulloch Chair in Energy Law and Director, Tulane Center for Energy Law Tulane Law School; Professor of European Economic and Energy Law, UEF Law School; Professor of Energy Law, University of Helsinki.
Energy storage is a key component of energy markets in the widest sense. This includes oil, oil products, natural gas, coal and power, including all forms of primary energy used to generate power.
For the first time ever, on 20 April 2020, the world witnessed oil prices in traded markets going negative. The direct reason for this was COVID-19, the failure of OPEC+ (Saudi Arabia and Russia) to agree appropriate output cuts on 6 March 2020 and the demand and supply shocks that concurrently resulted. Quietly, against the backdrop of the foregoing, an over-supply of crude was building placing increasing demand on a key component of infrastructure leading to negative prices, viz. oil storage. Specifically, with both onshore storage facilities and available oil tankers beginning to fill-up, there was simply nowhere left to place the physical crude oil production and no hedging or other tools of financial engineering were left available to help. Stated alternatively, the demand for storage led to pricing that exceeded the value of the underlying commodity - this became a problem.
At the same time, the world is looking increasingly towards electrification to address urgent climate change reduction targets. Energy and climate policies in many countries, particularly in Europe, North America and Australia foresee a growing vehicle fleet powered by electricity. The increasing penetration of renewable energy, solar and wind in particular, is promising but creates challenges for the power market. Intermittent production as well as the management of demand spikes requires cost effective power storage solutions to manage. Bringing the price of storing 1 kw/hour of renewable power down to a level that enables it to effectively compete with the full value chain cost of power generated from hydrocarbons, remains one of the main obstacles impeding a more immediate transformation. The cost associated with developing the requisite new technology – whether these involve batteries or grids or both -- is not the only problem. In addition, the tax and regulation of storage can create disincentives for investments in this area.
These problems can be overcome, the initial stages of locating commercially viable solutions will require public sector intervention, including public infrastructure spending, R&D credits and other forms of pricing subsidies, such as those in Norway and many other European countries.
The cost-effective storage of gas and coal do not present unique technical or commercial challenges. Neither involve intermittent production issues. Producers of and traders in these commodities utilize storage to help smooth demand spikes or to exploit arbitrage opportunities. Typically, the location of gas storage is driven by geology and requires the re-injection of gas into salt domes or depleted gas reservoirs with appropriate seals. In the case of coal, storage facilities located near cities and human habitation give rise to environmental concerns and may cause the city, local or state government to enact rules on negative externalities. Such rules will include limitation on pollution and may require covering of coal storages. These rules are increasingly widely used and move towards more and more stringent requirements, for good reason.
Clearly, energy storage is currently one of the key issues that requires the urgent attention of policy makers, technology companies and strategic. Addressing the issue of energy storage will require the engagement of engineers and technical experts but also the attention of policy makers and lawyers.
This OGEL Special Issue seeks to provide information on national and international legal, regulatory and policy approaches to storage of different sources of energy (including oil and gas, power and others as set out above), financing options and contractual choices adopted in this area. We encourage the submission of relevant papers, studies, and brief commentaries on various aspects of this subject. The topics may cover a wide range of issues such as regulation of storage under national laws, national support schemes for energy storage, contractual questions relating to storage as well as specific case studies.
In particular, we are interested in contributions in the following areas:
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