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

Abstract

a b s t r a c tThis 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 linepack 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.

Line‐pack storage in biogas infrastructures at regional scale, a model approach

“…The biogas transport model 7 is used to determine the configuration (2) with minimal transport costs (3), from the input variables (1), this is the "transport-only condition." The biogas volume present in a grid (4) is called linepack, 27 measured in m 3 , under standard conditions, and can be found from the dimensions of the pipeline segments and the absolute pressure in the grid. 11 In a configuration with minimal transport costs, the maximum pressure in the grid is lower than the maximum allowable pressure, 0.9 MPa.…”

“…Line-pack storage of gas in the natural gas grid was studied and modeled, [19][20][21] including the interaction of line pack in natural gas grids and electrical energy generation from wind. 22,23 Also, the economic value of line-pack in relation to large-scale energy production has been discussed [24][25][26][27] ; line-pack in the natural gas grid can be seen as a flexibility tool. 28 The Dutch Transmission System Operator, Gas Transport Services, offers line-pack flexibility services to shippers who do not meet their daily balance criteria.…”

The Allocative Efficiency of the Dutch Gas-Balancing Market

“…Hence, the line pack functions as a buff er for network stability. Th e size of the line-pack fl exibility depends on physical characteristics of the network, in particular the diameter of the pipelines, the pressure at both the inlets and the outlets of the networks and the gas density (Keyaerts et al, 2011). Before the liberalization of gas markets, one actor was responsible for both network stability and injection/withdrawal of gas.…”

The development of gas hubs in Europe

“…Migliavacca (2009) surveys some aspects of the Italian balancing system, highlighting the contacts with the electricity sector, while KEMA (2009) offers an interesting report that deals nonetheless only briefly with balancing and flexibility, being concerned with transmission tariffs. Lapuerta (2010) examines some balancing mechanisms and analyzes the balancing system in the UK and Germany and Keyaerts et al (2011) deal with flexibility issues focusing on line-pack. Many studies deal with the impact of European integration on gas market: recently, Neumann and Cullmann (2012) measured the degree of integration of gas markets based on the prices of eight European hubs, finding a significant level of convergence.…”