IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v37y2009i2p721-732.html
   My bibliography  Save this article

A risk analysis for gas transport network planning expansion under regulatory uncertainty in Western Europe

Author

Listed:
  • Pelletier, C.
  • Wortmann, J.C.

Abstract

The natural gas industry in Western Europe went through drastic changes induced by the unbundling of the national companies, followed by the liberalization of gas trade and the regulation of gas transmission. Natural gas transmission is operated through a network of interconnected grids, and is capacity constrained. Each of the grids is locally regulated in terms of price limits on transportation services. Local tariff differences may induce unnatural gas routing within a network, creating congestion in some part of it. This phenomena is referred to as the Jepma effect. Following Jepma [2001. Gaslevering onder druk. Stichting JIN. Available at: www.jiqweb.org (52pp) (in Dutch)] this may lead to misguided investment decisions. In this paper a multi-stage linear program is used to simulate the repartition of the natural gas flow in an interconnected grid system on a succession of contracting periods. By this simulation, the risk linked to infrastructure investment is assessed. The risk measured can be seen as the probability of a negative present net value for the investment. The model is applied on an example of two grids that are on alternative routes serving same destinations. When applied to a specific situation of North-West Europe (Germany and The Netherlands), the model clearly demonstrates that the risks turn out to be too high to invest: there are hardly any scenarios under which an acceptable ROI will be realized. Given the current tariff policy and current publicly available forecasts of demand and supply, it is unlikely that market forces will attract additional investments in transportation capacity. This reluctance to invest can be prohibitive for further growth of supply if the demand would increase significantly.

Suggested Citation

  • Pelletier, C. & Wortmann, J.C., 2009. "A risk analysis for gas transport network planning expansion under regulatory uncertainty in Western Europe," Energy Policy, Elsevier, vol. 37(2), pages 721-732, February.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:2:p:721-732
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301-4215(08)00505-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. De Wolf, D. & Smeers, Y., 1996. "Optimal dimensioning of pipe networks with application to gas transmission networks," LIDAM Reprints CORE 1249, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Kabirian, Alireza & Hemmati, Mohammad Reza, 2007. "A strategic planning model for natural gas transmission networks," Energy Policy, Elsevier, vol. 35(11), pages 5656-5670, November.
    3. Daniel de Wolf & Yves Smeers, 1996. "Optimal Dimensioning of Pipe Networks with Application to Gas Transmission Networks," Operations Research, INFORMS, vol. 44(4), pages 596-608, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abbasi, Ali Reza & Seifi, Ali Reza, 2015. "Considering cost and reliability in electrical and thermal distribution networks reinforcement planning," Energy, Elsevier, vol. 84(C), pages 25-35.
    2. Richard S J Tol, 2018. "Policy Brief—Leaving an Emissions Trading Scheme: Implications for the United Kingdom and the European Union," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 183-189.
    3. dos Santos, Sidney Pereira & Eugenio Leal, José & Oliveira, Fabrício, 2011. "The development of a natural gas transportation logistics management system," Energy Policy, Elsevier, vol. 39(9), pages 4774-4784, September.
    4. Praks, Pavel & Kopustinskas, Vytis & Masera, Marcelo, 2015. "Probabilistic modelling of security of supply in gas networks and evaluation of new infrastructure," Reliability Engineering and System Safety, Elsevier, vol. 144(C), pages 254-264.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:cty:dpaper:1464 is not listed on IDEAS
    2. 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.
    3. Demierre, Jonathan & Bazilian, Morgan & Carbajal, Jonathan & Sherpa, Shaky & Modi, Vijay, 2015. "Potential for regional use of East Africa’s natural gas," Applied Energy, Elsevier, vol. 143(C), pages 414-436.
    4. repec:cty:dpaper:10.1080/0013791x.2011.573615 is not listed on IDEAS
    5. Daniel de Wolf, 2017. "Mathematical Properties of Formulations of the Gas Transmission Problem," Post-Print halshs-02396747, HAL.
    6. Mengying Xue & Tianhu Deng & Zuo‐Jun Max Shen, 2019. "Optimizing natural gas pipeline transmission with nonuniform elevation: A new initialization approach," Naval Research Logistics (NRL), John Wiley & Sons, vol. 66(7), pages 547-564, October.
    7. Dieckhoener, Caroline, 2010. "Simulating security of supply effects of the Nabucco and South Stream projects for the European natural gas market," EWI Working Papers 2010-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), revised 21 Jan 2012.
    8. Daniel de Wolf & Yves Smeers, 2021. "Generalized derivatives of the optimal value of a linear program with respect to matrix coefficients," Post-Print halshs-02396708, HAL.
    9. Frédéric Babonneau & Yurii Nesterov & Jean-Philippe Vial, 2012. "Design and Operations of Gas Transmission Networks," Operations Research, INFORMS, vol. 60(1), pages 34-47, February.
    10. Zhou, Jun & Zhao, Yunxiang & Fu, Tiantian & Zhou, Xuan & Liang, Guangchuan, 2022. "Dimension optimization for underground natural gas storage pipeline network coupling injection and production conditions," Energy, Elsevier, vol. 256(C).
    11. 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.
    12. Jesco Humpola & Felipe Serrano, 2017. "Sufficient pruning conditions for MINLP in gas network design," EURO Journal on Computational Optimization, Springer;EURO - The Association of European Operational Research Societies, vol. 5(1), pages 239-261, March.
    13. De Wolf, Daniel & Smeers, Yves, 2021. "Generalized derivatives of the optimal value of a linear program with respect to matrix coefficients," European Journal of Operational Research, Elsevier, vol. 291(2), pages 491-496.
    14. Andre, Jean & Bonnans, Frédéric & Cornibert, Laurent, 2009. "Optimization of capacity expansion planning for gas transportation networks," European Journal of Operational Research, Elsevier, vol. 197(3), pages 1019-1027, September.
    15. Jean André & Stéphane Auray & Daniel de Wolf & Mohamed-Mahmoud Memmah & Antoine Simonnet, 2014. "Time development of new hydrogen transmission pipeline networks for France," Post-Print halshs-02396799, HAL.
    16. Taanman, Mattijs & Groot, Arend de & Kemp, René & Verspagen, Bart, 2006. "Diffusion Paths for Micro Cogeneration Using Hydrogen in the Netherlands," MERIT Working Papers 2006-025, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    17. André, Jean & Auray, Stéphane & Brac, Jean & De Wolf, Daniel & Maisonnier, Guy & Ould-Sidi, Mohamed-Mahmoud & Simonnet, Antoine, 2013. "Design and dimensioning of hydrogen transmission pipeline networks," European Journal of Operational Research, Elsevier, vol. 229(1), pages 239-251.
    18. Jesco Humpola & Armin Fügenschuh & Thorsten Koch, 2016. "Valid inequalities for the topology optimization problem in gas network design," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(3), pages 597-631, July.
    19. Christopher Yeates & Cornelia Schmidt-Hattenberger & Wolfgang Weinzierl & David Bruhn, 2021. "Heuristic Methods for Minimum-Cost Pipeline Network Design – a Node Valency Transfer Metaheuristic," Networks and Spatial Economics, Springer, vol. 21(4), pages 839-871, December.
    20. Steven A. Gabriel & Supat Kiet & Jifang Zhuang, 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets," Operations Research, INFORMS, vol. 53(5), pages 799-818, October.
    21. Liang, Yingzong & Hui, Chi Wai, 2018. "Convexification for natural gas transmission networks optimization," Energy, Elsevier, vol. 158(C), pages 1001-1016.
    22. Thapalia, Biju K. & Crainic, Teodor Gabriel & Kaut, Michal & Wallace, Stein W., 2012. "Single-commodity network design with random edge capacities," European Journal of Operational Research, Elsevier, vol. 220(2), pages 394-403.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:37:y:2009:i:2:p:721-732. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.