Gas Storage Valuation: Price Modelling v. Optimization Methods
AbstractIn the literature, one approach is to analyse gas storage within a simple one-factor price dynamics framework that is solved to optimality. We follow an alternative approach, where the market is represented by a forward curve with daily granularity, the price uncertainty is represented by six factors, and where we impose a simple and intuitive storage strategy. Based on UK natural gas market price data, we obtain the gas storage value using our approach, and compare with results from a one-factor model as well as with perfect foresight. We find that our approach captures much more of the true flexibility value than the one-factor model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by International Association for Energy Economics in its journal The Energy Journal.
Volume (Year): Volume 32 (2011)
Issue (Month): Number 1 ()
Other versions of this item:
- Bjerksund, Petter & Stensland, Gunnar & Vagstad, Frank, 2008. "Gas Storage Valuation: Price Modelling v. Optimization Methods," Discussion Papers 2008/20, Department of Business and Management Science, Norwegian School of Economics.
- F0 - International Economics - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert A. Jarrow, 2009. "The Term Structure of Interest Rates," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 69-96, November.
- Cox, John C. & Ross, Stephen A., 1976. "The valuation of options for alternative stochastic processes," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 145-166.
- Giulietti, Monica & Grossi, Luigi & Waterson, Michael, 2011. "A Rough Examination of the value of gas storage," The Warwick Economics Research Paper Series (TWERPS) 967, University of Warwick, Department of Economics.
- Felix, Bastian Joachim & Weber, Christoph, 2012. "Gas storage valuation applying numerically constructed recombining trees," European Journal of Operational Research, Elsevier, vol. 216(1), pages 178-187.
- Arvesen, Øystein & Medbø, Vegard & Fleten, Stein-Erik & Tomasgard, Asgeir & Westgaard, Sjur, 2012. "Linepack storage valuation under price uncertainty," MPRA Paper 43270, University Library of Munich, Germany.
- Steffen, Bjarne & Weber, Christoph, 2013.
"Efficient storage capacity in power systems with thermal and renewable generation,"
Elsevier, vol. 36(C), pages 556-567.
- Bjarne Steffen & Christoph Weber, 2011. "Efficient storage capacity in power systems with thermal and renewable generation," EWL Working Papers 1104, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Aug 2011.
- Bastian Felix, 2012. "Gas Storage Valuation: A Comparative Simulation Study," EWL Working Papers 1201, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Apr 2014.
- Patrick Henaff & Ismail Laachir & Francesco Russo, 2013. "Gas storage valuation and hedging. A quantification of the model risk," Papers 1312.3789, arXiv.org.
- Fleten, Stein-Erik & Bråthen, Espen & Nissen-Meyer, Sigurd-Erik, 2010. "Evaluation of static hedging strategies for hydropower producers in the Nordic market," MPRA Paper 27133, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.