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Gas market distorting effects of imbalanced gas balancing rules: Inefficient regulation of pipeline flexibility

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  • Keyaerts, Nico
  • Hallack, Michelle
  • Glachant, Jean-Michel
  • D'haeseleer, William

Abstract

This paper analyzes the value and cost of line-pack flexibility in liberalized gas markets through examination of the techno-economic characteristics of gas transport pipelines and the trade-offs between different ways to use the infrastructure: transport and flexibility. Line-pack flexibility is becoming increasingly important as a tool to balance gas supply and demand over different periods. In the European liberalized market context, a monopolist unbundled network operator offers regulated transport services and flexibility (balancing) services according to the network code and balancing rules. Therefore, gas policy makers should understand the role and consequences of line-pack regulation. The analysis shows that the line-pack flexibility service has an important economic value for the shippers and the TSO. Furthermore, the analysis identifies distorting effects in the gas market due to inadequate regulation of line-pack flexibility: by disregarding the sunk costs of flexibility in the balancing rules, the overall efficiency of the gas system is decreased. Finally, the analysis demonstrates that the actual costs of line-pack flexibility are related to the peak cumulative imbalance throughout the balancing period. Any price for pipeline flexibility should, therefore, be based on the related trade-off between the right to use the line-pack flexibility and the provision of transport services.

Suggested Citation

  • Keyaerts, Nico & Hallack, Michelle & Glachant, Jean-Michel & D'haeseleer, William, 2011. "Gas market distorting effects of imbalanced gas balancing rules: Inefficient regulation of pipeline flexibility," Energy Policy, Elsevier, vol. 39(2), pages 865-876, February.
  • Handle: RePEc:eee:enepol:v:39:y:2011:i:2:p:865-876
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fodstad, Marte & Midthun, Kjetil T. & Tomasgard, Asgeir, 2015. "Adding flexibility in a natural gas transportation network using interruptible transportation services," European Journal of Operational Research, Elsevier, vol. 243(2), pages 647-657.
    2. Arvesen, Ø. & Medbø, V. & Fleten, S.-E. & Tomasgard, A. & Westgaard, S., 2013. "Linepack storage valuation under price uncertainty," Energy, Elsevier, vol. 52(C), pages 155-164.
    3. Miriello, Caterina & Polo, Michele, 2015. "The development of gas hubs in Europe," Energy Policy, Elsevier, vol. 84(C), pages 177-190.
    4. Keyaerts, Nico & D'haeseleer, William, 2014. "Forum shopping for ex-post gas-balancing services," Energy Policy, Elsevier, vol. 67(C), pages 209-221.
    5. Vazquez, Miguel & Hallack, Michelle, 2015. "Interaction between gas and power market designs," Utilities Policy, Elsevier, vol. 33(C), pages 23-33.
    6. Bekkering, J. & Broekhuis, A.A. & van Gemert, W.J.T. & Hengeveld, E.J., 2013. "Balancing gas supply and demand with a sustainable gas supply chain – A study based on field data," Applied Energy, Elsevier, vol. 111(C), pages 842-852.
    7. repec:gam:jeners:v:11:y:2018:i:4:p:734-:d:137772 is not listed on IDEAS
    8. Keyaerts, Nico & D'haeseleer, William, 2012. "Increasing efficiency through market-based cross-border procurement of gas-balancing services in Europe," Energy, Elsevier, vol. 47(1), pages 564-576.
    9. Keyaerts, Nico & Delarue, Erik & Rombauts, Yannick & D’haeseleer, William, 2014. "Impact of unpredictable renewables on gas-balancing design in Europe," Applied Energy, Elsevier, vol. 119(C), pages 266-277.
    10. Kumar, Satish & Kwon, Hyouk-Tae & Choi, Kwang-Ho & Hyun Cho, Jae & Lim, Wonsub & Moon, Il, 2011. "Current status and future projections of LNG demand and supplies: A global prospective," Energy Policy, Elsevier, vol. 39(7), pages 4097-4104, July.
    11. Hallack, Michelle & Vazquez, Miguel, 2013. "European Union regulation of gas transmission services: Challenges in the allocation of network resources through entry/exit schemes," Utilities Policy, Elsevier, vol. 25(C), pages 23-32.

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