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A fundamental analysis on the implementation and development of virtual natural gas hubs

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  • del Valle, Aurora
  • Dueñas, Pablo
  • Wogrin, Sonja
  • Reneses, Javier

Abstract

The ongoing gas market liberalization in Europe has brought up a new competitive environment in which shippers (i.e., companies that are responsible for conveying gas from producers to consumers) must adapt their behavior to the changing conditions. The development of gas virtual hubs increases market interactions among shippers, but the oligopolistic market structure may give room for strategic behavior. The market is in addition segmented by type of costumer. Each shipper maximizes its profit by supplying gas to households, businesses and industries (conventional costumers), participating in the electricity market, trading in the global LNG spot market and interacting with the rest of shippers in a virtual hub. During the hub implementation and development, the following questions arise: How do shippers behave at the different levels of hub maturity? And, to what extent does the implementation of virtual hubs in entry-exit systems diminish the barriers to entry of new market players, provides more flexibility and fosters competition?

Suggested Citation

  • del Valle, Aurora & Dueñas, Pablo & Wogrin, Sonja & Reneses, Javier, 2017. "A fundamental analysis on the implementation and development of virtual natural gas hubs," Energy Economics, Elsevier, vol. 67(C), pages 520-532.
    • Handle: RePEc:eee:eneeco:v:67:y:2017:i:c:p:520-532
    DOI: 10.1016/j.eneco.2017.08.001
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    Cited by:

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    2. Szafranek Karol & Rubaszek Michał, 2024. "Have European natural gas prices decoupled from crude oil prices? Evidence from TVP-VAR analysis," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 28(3), pages 507-530.
    3. Bastianin, Andrea & Galeotti, Marzio & Polo, Michele, 2019. "Convergence of European natural gas prices," Energy Economics, Elsevier, vol. 81(C), pages 793-811.
    4. Hupka, Yuri & Popova, Ivilina & Simkins, Betty & Lee, Thomas, 2023. "A review of the literature on LNG: Hubs development, market integration, and price discovery," Journal of Commodity Markets, Elsevier, vol. 31(C).
    5. Lan, Liuhan & Zhang, Youzhong & Zhang, Xingping & Zhang, Xinyue, 2024. "Price effect of multi-energy system with CCS and P2G and its impact on carbon-gas-electricity sectors," Applied Energy, Elsevier, vol. 359(C).
    6. Roach, Martin & Meeus, Leonardo, 2020. "The welfare and price effects of sector coupling with power-to-gas," Energy Economics, Elsevier, vol. 86(C).

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    More about this item

    Keywords

    Natural gas virtual hubs; Market liberalization; Entry-exit access system; Mathematical modeling;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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