IDEAS home Printed from https://ideas.repec.org/a/taf/uteexx/v56y2011i2p95-122.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/0013791X.2011.573615
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0013791X.2011.573615?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

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

    Other versions of this item:

    References listed on IDEAS

    as
    1. James M. Griffin, 1977. "Long-Run Production Modeling with Pseudo Data: Electric Power Generation," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 112-127, Spring.
    2. 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.
    3. James M. Griffin, 1979. "Statistical Cost Analysis Revisited," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(1), pages 107-129.
    4. Hanan Luss, 1982. "Operations Research and Capacity Expansion Problems: A Survey," Operations Research, INFORMS, vol. 30(5), pages 907-947, October.
    5. Griffin, James M, 1978. "Joint Production Technology: The Case of Petrochemicals," Econometrica, Econometric Society, vol. 46(2), pages 379-396, March.
    6. Christophe Barret & Philippe Chollet, 1990. "Canadian Gas Exports : Modeling a Market in Disequilibrium," Working Papers hal-02432570, HAL.
    7. DE WOLF, Daniel & SMEERS, Yves, 2000. "The gas transmission problem solved by an extension of the simplex algorithm," LIDAM Reprints CORE 1489, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Russell G. Thompson & Michael S. Proctor & R. R. Hocking, 1972. "Investment-Borrowing Decisions in Natural Gas Transmission," Management Science, INFORMS, vol. 18(10), pages 544-554, June.
    9. Vernon L. Smith, 1959. "The Theory of Investment and Production," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(1), pages 61-87.
    10. Axel Pierru, 2007. "Short-run and long-run marginal costs of joint products in linear programming," Recherches économiques de Louvain, De Boeck Université, vol. 73(2), pages 153-171.
    11. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    12. Hollis B. Chenery, 1949. "Engineering Production Functions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 63(4), pages 507-531.
    13. 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).
    14. 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.
    15. Callen, Jeffrey L, 1978. "Production, Efficiency, and Welfare in the Natural Gas Transmission Industry," American Economic Review, American Economic Association, vol. 68(3), pages 311-323, June.
    16. 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.
    17. Daniel De Wolf & Yves Smeers, 2000. "The Gas Transmission Problem Solved by an Extension of the Simplex Algorithm," Management Science, INFORMS, vol. 46(11), pages 1454-1465, November.
    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. Adrien Nicolle & Diego Cedreros & Olivier Massol & Emma Jagu Schippers, 2023. "Modeling CO2 Pipeline Systems : An Analytical Lens for CCS Regulation," Working Papers hal-04087681, HAL.
    2. 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.
    3. 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).
    4. Olivier Massol & Albert Banal-Estañol, 2014. "Market power across the Channel: Are Continental European gas markets isolated ?," Working Papers hal-02475017, HAL.
    5. 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.
    6. 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).
    7. 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.
    8. 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 University London.
    9. Nicolle, Adrien & Massol, Olivier, 2023. "Build more and regret less: Oversizing H2 and CCS pipeline systems under uncertainty," Energy Policy, Elsevier, vol. 179(C).

    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:10.1080/0013791x.2011.573615 is not listed on IDEAS
    2. repec:cty:dpaper:1464 is not listed on IDEAS
    3. 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.
    4. Conrado Borraz-Sánchez & Russell Bent & Scott Backhaus & Hassan Hijazi & Pascal Van Hentenryck, 2016. "Convex Relaxations for Gas Expansion Planning," INFORMS Journal on Computing, INFORMS, vol. 28(4), pages 645-656, November.
    5. 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.
    6. Ralf Lenz & Kai Helge Becker, 2022. "Optimization of capacity expansion in potential-driven networks including multiple looping: a comparison of modelling approaches," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(1), pages 179-224, March.
    7. Jingkuan Han & Yingjun Xu & Dingzhi Liu & Yanfang Zhao & Zhongde Zhao & Shuhui Zhou & Tianhu Deng & Mengying Xue & Junchi Ye & Zuo-Jun Max Shen, 2019. "Operations Research Enables Better Planning of Natural Gas Pipelines," Interfaces, INFORMS, vol. 49(1), pages 23-39, January.
    8. Daniel de Wolf, 2017. "Mathematical Properties of Formulations of the Gas Transmission Problem," Post-Print halshs-02396747, HAL.
    9. Liang, Yingzong & Hui, Chi Wai, 2018. "Convexification for natural gas transmission networks optimization," Energy, Elsevier, vol. 158(C), pages 1001-1016.
    10. 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.
    11. 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.
    12. Jesco Humpola & Armin Fügenschuh, 2015. "Convex reformulations for solving a nonlinear network design problem," Computational Optimization and Applications, Springer, vol. 62(3), pages 717-759, December.
    13. Olivier Massol & Stéphane Tchung-Ming, 2012. "Joining the CCS Club ! Insights from a Northwest European CO2 pipeline project," Working Papers hal-03206457, HAL.
    14. 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.
    15. Mikolajková, Markéta & Haikarainen, Carl & Saxén, Henrik & Pettersson, Frank, 2017. "Optimization of a natural gas distribution network with potential future extensions," Energy, Elsevier, vol. 125(C), pages 848-859.
    16. Yijiang Li & Santanu S. Dey & Nikolaos V. Sahinidis, 2024. "A reformulation-enumeration MINLP algorithm for gas network design," Journal of Global Optimization, Springer, vol. 90(4), pages 931-963, December.
    17. 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.
    18. 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.
    19. 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.
    20. Mikolajková, Markéta & Saxén, Henrik & Pettersson, Frank, 2018. "Linearization of an MINLP model and its application to gas distribution optimization," Energy, Elsevier, vol. 146(C), pages 156-168.
    21. Shiono, Naoshi & Suzuki, Hisatoshi, 2016. "Optimal pipe-sizing problem of tree-shaped gas distribution networks," European Journal of Operational Research, Elsevier, vol. 252(2), pages 550-560.
    22. 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.

    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

    Statistics

    Access and download statistics

    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:taf:uteexx:v:56:y:2011:i:2:p:95-122. 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/UTEE20 .

    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.