Market equilibrium in natural gas systems: analysis of the implementation of a hub

Abstract

The introduction of competition in the gas market, increases the interaction among shippers, changing the scenario they have to face and therefore their behavior. Gas demand is expected to be more flexible, mainly because of the used of natural gas fired power plants (NGGFPPs) to back up intermittent generation. Conversely, most of the contracts are long term contracts, which are not suitable for this flexible demand scenario and oblige shippers to balance their position in the OTC market. With the introduction of hubs, transactions costs are reduced and additional flexibility is achieved. In this paper, the strategic behavior of the shippers in a market environment is represented. The proposed model furthermore considers the introduction of a hub and how shippers interact among them within it. Finally, the different methodologies used to solve the problem are described.