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A Cost Function for the Natural Gas Transmission Industry: Further Considerations

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  • Olivier Massol

Abstract

This article studies the cost function for the natural gas transmission industry. In addition to a tribute to H.B. Chenery, it firstly offers some further comments on a recent contribution (Yépez 2008): a statistical characterization of long-run scale economies and a simple reformulation of the long-run problem. An extension is then proposed to analyze how the presence of seasonally varying flows modifies the optimal design of a transmission infrastructure. Lastly, the case of a firm that anticipates a possible random rise in its future output is also studied to discuss the optimal degree of excess capacity to be built into a new transmission infrastructure.

Suggested Citation

  • Olivier Massol, 2011. "A Cost Function for the Natural Gas Transmission Industry: Further Considerations," The Engineering Economist, Taylor & Francis Journals, vol. 56(2), pages 95-122.
    • Handle: RePEc:taf:uteexx:v:56:y:2011:i:2:p:95-122
    DOI: 10.1080/0013791X.2011.573615
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    Cited by:

    1. Olivier Massol & Albert Banal-Estañol, 2014. "Market power across the Channel: Are Continental European gas markets isolated ?," Working Papers hal-02475017, HAL.
    2. Massol, Olivier & Tchung-Ming, Stéphane & Banal-Estañol, Albert, 2015. "Joining the CCS club! The economics of CO2 pipeline projects," European Journal of Operational Research, Elsevier, vol. 247(1), pages 259-275.
    3. Martinez-Rodriguez, Miguel & Chyong, Chi Kong & Fitzgerald, Timothy & Vazquez, Miguel & Hidalgo, Antonio, 2026. "Pipeline regulation for hydrogen: choosing between paths and networks," Energy Policy, Elsevier, vol. 208(C).
    4. Perrotton, Florian & Massol, Olivier, 2020. "Rate-of-return regulation to unlock natural gas pipeline deployment: Insights from a Mozambican project," Energy Economics, Elsevier, vol. 85(C).
    5. Waidelich, Paul & Haug, Tomas & Wieshammer, Lorenz, 2022. "German efficiency gone wrong: Unintended incentives arising from the gas TSOs’ benchmarking," Energy Policy, Elsevier, vol. 160(C).
    6. Perrotton, Florian & Massol, Olivier, 2018. "The technology and cost structure of a natural gas pipeline: Insights for costs and rate-of-return regulation," Utilities Policy, Elsevier, vol. 53(C), pages 32-37.
    7. Frédérique Fève & Jean-Pierre Florens & Léopold Simar, 2025. "Reconciling Engineers and Economists: the Case of a Cost Function for the Distribution of Gas," Working Papers hal-05081178, HAL.
    8. Olivier Massol & Albert Banal-Estanol, 2018. "Market Power and Spatial Arbitrage between Interconnected Gas Hubs," The Energy Journal, , vol. 39(2_suppl), pages 67-96, December.
    9. Adrien Nicolle & Diego Cebreros & Olivier Massol & Emma Jagu, 2023. "Modeling CO2 pipeline systems: An analytical lens for CCS regulation," Post-Print hal-04297191, HAL.
    10. Massol, O. & Tchung-Ming, S., 2012. "Joining the CCS Club! Insights from a Northwest European CO2 Pipeline Project," Working Papers 12/10, Department of Economics, City St George's, University of London.
    11. repec:tse:wpaper:130535 is not listed on IDEAS
    12. Nicolle, Adrien & Massol, Olivier, 2023. "Build more and regret less: Oversizing H2 and CCS pipeline systems under uncertainty," Energy Policy, Elsevier, vol. 179(C).

    More about this item

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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