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The Gas Transportation Network as a ‘Lego’ Game: How to Play with It?

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  • Jean Michel Glachant and Michelle Hallack

Abstract

Gas transportation networks exhibit a quite substantial variety of technical and economical properties ranges roughly from an entrenched natural monopoly to near to an open competition platform. This empirical fact is widely known and accepted. However the corresponding frame of network analysis is lacking or quite fuzzy. As an infrastructure, can a gas network evolve or not from a natural monopoly (an essential facility) to an open infrastructure (a highway facility)? How can it be done with the same transportation infrastructure components within the same physical gas laws? Our paper provides a unified analytical frame for all types of gas transportation networks. It shows that gas transport networks are made of several components which can be combined in different ways. This very lego property of gas networks permits different designs with different economic properties while a certain infrastructural base and set of gas laws is common to all transportation networks. Therefore the notion of gas transportation network as a general and abstract concept does not have robust economic properties. The variety and modularity of gas networks come from the diversity of components, the variety of components combinations and the historical inclusion of components in the network. First, a gas network can combine different types of network components (primary or secondary ones). Second, the same components can be combined in different ways (notably regarding actual connections and flow paths). Third, as a capital-intensive infrastructure combining various specific assets, gas transportation networks show strong path dependency properties as they evolve slowly over time by moving from an already existing base. The heterogeneity of gas networks as sets of components comes firstly from the heterogeneity of the network components themselves, secondly from the different possibilities to combine these components and thirdly from the ‘path dependence’ character of gas network constructions. These three characteristics of gas networks explain the diversity of economic proprieties of the existent gas networks going from natural monopoly to competitive markets.

Suggested Citation

  • Jean Michel Glachant and Michelle Hallack, 2010. "The Gas Transportation Network as a ‘Lego’ Game: How to Play with It?," EUI-RSCAS Working Papers 42, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  • Handle: RePEc:erp:euirsc:p0254
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    Cited by:

    1. Colomer Ferraro, Marcelo & Hallack, Michelle, 2012. "The development of the natural gas transportation network in Brazil: Recent changes to the gas law and its role in co-ordinating new investments," Energy Policy, Elsevier, vol. 50(C), pages 601-612.

    More about this item

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L29 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Other
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D6 - Microeconomics - - Welfare Economics

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