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Design of auctions for short-term allocation in gas markets based on virtual hubs

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  • Miguel Vazquez
  • Michelle Hallack

Abstract

Gas markets based on virtual hubs has been the preferred EU design. Such market designs are based on socializing network flexibility services. Nonetheless, shippers have different preferences about the network flexibility, which are not reflected in current allocation models. We propose the introduction of auction mechanisms to deal with network service allocation in the short term. The auction aims to represent simultaneously the diversity of players' preferences and the trade-offs implied by network constraints. Two sealed-bid auctions are proposed. On the one hand, an auction with one product allocates network services through the minimization of gas price differences. On the other, a multi-product (gas and line-pack storage) auction is designed to facilitate the revelation of preferences on line-pack storage.

Suggested Citation

  • Miguel Vazquez & Michelle Hallack, 2012. "Design of auctions for short-term allocation in gas markets based on virtual hubs," RSCAS Working Papers 2012/43, European University Institute.
    • Handle: RePEc:rsc:rsceui:2012/43
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    Cited by:

    1. Miguel Vazquez & Michelle Hallack, 2013. "Interaction between gas and electricity market-based trading in the short run," RSCAS Working Papers 2013/42, European University Institute.
    2. Miriello, Caterina & Polo, Michele, 2015. "The development of gas hubs in Europe," Energy Policy, Elsevier, vol. 84(C), pages 177-190.
    3. Miguel Vazquez & Michelle Hallack & Jean-Michel Glachant, 2012. "Designing the European Gas Market: More Liquid & Less Natural?," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 3).
    4. Hallack, Michelle & Vazquez, Miguel, 2013. "European Union regulation of gas transmission services: Challenges in the allocation of network resources through entry/exit schemes," Utilities Policy, Elsevier, vol. 25(C), pages 23-32.

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