An entry-exit gas system model: application to the Iberian natural gas market

Abstract

Since the promulgation of the Third Energy Package by the European Commission, relevant efforts have taken place to harmonize country-level regulatory frameworks and constitute the Single natural gas market. One of the main changes is the ownership unbundling of transmission assets, the creation of an Independent System Operator and the adoption of an entry-exit system for third party access. Within this new regulatory framework, shippers that are in charge of conveying gas from producers to consumers must contract capacity and operate in gas facilities. This paper develops an optimization model to analyze shippers’ behavior in entry-exit markets, which can be used equally by shippers, independent system and facility operators, and regulatory authorities. The model has been applied to an actual gas market, like the Iberian natural gas market. Results indicate that different optimal contracting and operation behaviors take place in gas facilities. Moreover, after a market efficiency examination, the paper proposes regulatory measures that would support the objectives of the European Commission (competition, security of supply and sustainability) such as the merger of balancing zones and the constitution of competitive balancing and secondary capacity markets.