Nodal prices, capacity valuation and investments in natural gas markets - Overview and Analytical Framework

Especially in the short-term, prices in natural gas markets are not exclusively determined by overall supply and demand, but also by the availability of the transport infrastructure. If transportation capacity is scarce, prices may form in (local) residual markets and can differ regionally. If available, storages provide intertemporal arbitrage possibilities which also impact prices. Temporal and regional price differences, in turn, determine the value of storage and transport capacity if either one is scarce. This paper applies an analytical framework for a simple pipeline grid with a storage over two periods to illustrate the interdependencies between prices, scarce capacity and capacity value. The theoretically optimal transportation and storage tariffs are described analytically. The optimal pipeline investment size is shown to be related to marginal storage investment and a function of the discounted and aggregated cost of congestion over the lifetime's asset.Natural gas; Prices; Transport capacity; Storage; Investment

A mathematical framework for modelling and evaluating natural gas pipeline networks under hydrogen injection

This article presents the framework of a mathematical formulation for modelling and evaluating natural gas pipeline networks under hydrogen injection. The model development is based on gas transport through pipelines and compressors which compensate for the pressure drops by implying mainly the mass and energy balances on the basic elements of the network. The model was initially implemented for natural gas transport and the principle of extension for hydrogen-natural gas mixtures is presented. The objective is the treatment of the classical fuel minimizing problem in compressor stations. The optimization procedure has been formulated by means of a nonlinear technique within the General Algebraic Modelling System (GAMS) environment. This work deals with the adaptation of the current transmission networks of natural gas to the transport of hydrogen-natural gas mixtures. More precisely, the quantitative amount of hydrogen that can be added to natural gas can be determined. The studied pipeline network,initially proposed by Abbaspour et al. (2005) is revisited here for the case of hydrogen-natural gas mixtures. Typical quantitative results are presented, showing that the addition of hydrogen to natural gas decreases significantly the transmitted power : the maximum fraction of hydrogen that can be added to natural gas is around 6 mass percent for this example

Mathematical Models for Natural Gas Forecasting

It is vital for natural gas Local Distribution Companies (LDCs) to forecast their customers\u27 natural gas demand accurately. A significant error on a single very cold day can cost the customers of the LDC millions of dollars. This paper looks at the financial implication of forecasting natural gas, the nature of natural gas forecasting, the factors that impact natural gas consumption, and describes a survey of mathematical techniques and practices used to model natural gas demand. Many of the techniques used in this paper currently are implemented in a software GasDayTM, which is currently used by 24 LDCs throughout the United States, forecasting about 20% of the total U.S. residential, commercial, and industrial consumption. Results of GasDay\u27sTM forecasting performance also is presented

European natural gas markets: resource constraints and market power

We analyze long-run scenarios for the European natural gas markets in a model, NATGAS, that explicitly includes both resource constraints and producers’ market power. Europa wordt geconfronteerd met afnemende eigen aardgasvoorraden, met name in de van oudsher grote producenten het Verenigd Koninkrijk en Nederland. De Europese afhankelijkheid van een beperkt aantal grote aardgasleveranciers zal toenemen. Daarmee groeit ook de marktmacht van deze producerende landen. We bekijken de invloed van de beschikbaarheid van vloeibaar aardgas, LNG, op de marktaandelen van producenten en de snelheid van uitputting van Europese voorraden. We bestuderen in het bijzonder hoe in de verschilende scenario's de schaduwprijzen van eindige voorraden de productiebeslissingen beïnvloeden. The European natural gas market is characterized by declining indigenous resources, particularly in the UK and the Netherlands, and a growing dependence on a small number of large exporters who, as a consequence, see their market power increasing. We analyze the impact of conditions on the global LNG market on market shares of pipeline gas suppliers, as well as on the speed of depletion of indigenous European resources. We focus on how shadow prices of resource constraints affect substitution patterns in the various scenarios.