Strategic reserve

Types of strategic reserve

A strategic reserve can be:

• Financial in nature such as ring-fenced funding or capital reserves of a large corporation.
• A commodity, such as intervention stocks of food or petrol (see security of supply and strategic petroleum reserves)
• Specific machinery, such as railroad cars or steam locomotives, to be used in an emergency situation.

Examples of commodity reserves:

• Global strategic petroleum reserves
  • Northeast Home Heating Oil Reserve
• Strategic uranium reserves
• National Helium Reserve
• Strategic grain reserve
• Gold reserve
• International Strategic Reserve of the Federation of Quebec Maple Syrup Producers
• Strategic National Stockpile – medical supplies in the U.S.
• Strategic Technology Reserve – held by the states of Alabama, Illinois, New Jersey and North Carolina

Certain countries create their own unusual strategic reserves of food or commodities they value the most, such as cotton, butter, pork, raisins or even maple syrup.

Energy strategic reserves

Strategic reserve can be also applied as an economic instrument in order to stabilize investments in a specific industry and provide sufficient investment incentive as described in the following example. This time the strategic reserve is defined as a set of power plants or interruptible demand contracts, all controlled by the TSO (transmission system operator), that can be used during temporary lack electricity. The strategic reserve does not necessarily mean a change of available generation capacity, the TSO only takes the control over certain power plants or even averts some power stations from being decommissioned. The activation of such a strategic reserve due to shortage of generation volume at prices above the variable costs of the generation units can lead to a rise of the average electricity price and therefore spark more investments into the generation capacity sector, the main market purpose of the strategic reserve here consists of securing a corresponding investment incentive. One of the main European TSO's is a Belgian company Elia, that operates in Belgium and Germany.

References

References

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6. (2012-10-10). "$3.1 Million U.S. Department of Commerce Grant Ensures Strategic Technology Reserve (STR) For Hard-Hit Disaster Areas".
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8. (2016-10-15). "15 Strategic Reserves of Unusual Products".
9. "Capacity mechanisms for electricity".
10. (2016-04-01). "The effectiveness of a strategic reserve in the presence of a high portfolio share of renewable energy sources". Utilities Policy.
11. "About Elia".
12. (2020-01-01). "Elia System Operator". Wikipedia.