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Economic value of underground natural gas storage for the Brazilian power sector

Author

Listed:
  • Almeida, José Ricardo Uchoa Cavalcanti
  • Fagundes De Almeida, Edmar Luiz
  • Torres, Ednildo Andrade
  • Freires, Francisco Gaudencio Mendonça

Abstract

This paper aims at assessing the main obstacles to the development of underground natural gas storage (UGS) in Brazil and at identifying the conditions required for the feasibility of UGS projects in the country. The paper estimates the economic value of UGS facilities for the power sector in Brazil, considering the specificities of the Brazilian power and gas sectors. It is shown that the Brazilian gas demand does not have a seasonal characteristic; instead, the demand is volatile of a random nature associated with the demand from thermal power plants, which are complementary to hydropower generation. This paper has proved that there is an important economic value associated with the storage of gas in periods of low power prices and its consumption in period of high power prices. Finally, this paper argues that it is essential to seek mechanisms to include the economic value of UGS for the power sector into the UGS regulation and market design, as well as to explore the possibility of making gas storage a resource for the power sector operation.

Suggested Citation

  • Almeida, José Ricardo Uchoa Cavalcanti & Fagundes De Almeida, Edmar Luiz & Torres, Ednildo Andrade & Freires, Francisco Gaudencio Mendonça, 2018. "Economic value of underground natural gas storage for the Brazilian power sector," Energy Policy, Elsevier, vol. 121(C), pages 488-497.
    • Handle: RePEc:eee:enepol:v:121:y:2018:i:c:p:488-497
    DOI: 10.1016/j.enpol.2018.07.005
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    References listed on IDEAS

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    1. Ejarque, João Miguel, 2011. "Evaluating the economic cost of natural gas strategic storage restrictions," Energy Economics, Elsevier, vol. 33(1), pages 44-55, January.
    2. Cavaliere, Alberto & Giust, Valentina & Maggi, Mario, 2013. "Efficient mechanisms for access to storage when competition in gas markets is imperfect," Energy Economics, Elsevier, vol. 36(C), pages 481-490.
    3. Budny, Christoph & Madlener, Reinhard & Hilgers, Christoph, 2013. "Economic Feasibility of Pipeline and Underground Reservoir Storage Options for Power-to-Gas Load Balancing," FCN Working Papers 18/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
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    Cited by:

    1. Devine, Mel T. & Russo, Marianna, 2019. "Liquefied natural gas and gas storage valuation: Lessons from the integrated Irish and UK markets," Applied Energy, Elsevier, vol. 238(C), pages 1389-1406.
    2. Natalia Iwaszczuk & Ivanna Zapukhliak & Aleksander Iwaszczuk & Oleh Dzoba & Oleksandra Romashko, 2022. "Underground Gas Storage Facilities in Ukraine: Current State and Future Prospects," Energies, MDPI, vol. 15(18), pages 1-34, September.
    3. Larissa de Oliveira Resende & Davi Valladão & Bernardo Vieira Bezerra & Yasmin Monteiro Cyrillo, 2021. "Assessing the value of natural gas underground storage in the Brazilian system via stochastic dual dynamic programming," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 29(1), pages 106-124, April.

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