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Product & prices
Last updated on 18. September 2017
Valuation model for how to price storage products

Gas Storage Denmark offers customers the flexibility to inject, store and withdraw gas in and out of two storage facilities, which we operate as one common storage point.

Our price model is based on the value, which our storage customer generates by injecting gas during periods of low demand and price, and withdrawing gas during periods of high demand and price. The revenues are commonly named as intrinsic and extrinsic.

The driver of intrinsic value is the spread between summer and winter prices. The spread can be observed, calculated and hedged at the time of valuation of the storage product we offer. The extrinsic value refers to all other values that can be generated by the storage facility, but can only be observed and hedged to a certain extend at the time of valuation. The level of extrinsic value is a complex function of seasonal spreads, spot price spikes due to market dynamics and liquidity constraints. Graphically our price model can be illustrated by six columns.

  •  One orange column for intrinsic value calculated as summer/winter spread 
  •  Three red columns for cost-to-market expenditures, covering variable injection cost, cost of capital and TSO tariffs (which are zero in Denmark). In the example the cost-to-market is consequently deducted from the total price.
  • Four blue columns for extrinsic value, covering the value generated due to market spreads in Q1 vs. winter, market spreads Q2 vs. Q3, profiling month to quarter and optional e.g. spot spikes.


Storage Capacity = Intrinsic + (Extrinsic – Cost-to-market),

where the intrinsic and extrinsic value will be calculated under a range of pricing structures allowing risk differentiation, while the Cost-to-market will be selected by Gas Storage Denmark in dialogue with the customer.

The more flexible the storage product is the more important the extrinsic value becomes. Gas Storage Denmark uses a valuation model where the unit prices for injection and withdrawal capacity is calculated based on the assumption that injection can be moved from the highest priced quarter to the lowest priced quarter and withdrawal can be moved from the lowest priced month to the two highest priced months.

Below we give an example of how this calculation of unit price can be done for injection:

Similarly, we provide an example for calculating the unit price for withdrawal capacity:

The calculation of unit prices for injection and withdrawal capacity is based on observed forward prices for month and quarters. In addition, extra flexibility will also provide an opportunity to take advantage of price movements between months within a quarter and days within a month but this optional value goes to the customer.

The intrinsic value (summer/winter spread) can be calculated using a different range of pricing structures. This could for example depend on actual preferences:  

  • Fixed price, day ahead 
  • Pricing over all bank days in Q1. The working gas volume hedged each day by 1 divided with the number of bank days in Q1
  • Pricing over (up to) 5 individual bank days in Q1. The 5 days are selected by Gas Storage Denmark on day ahead basis. The working  gas volume hedged by at least 1/5th on each day

The calculation of spreads can be based on TTF, NCG or Gaspool quotations.​​