Market equilibrium in natural gas systems : analysis of theiImplementation of a hub

Abstract

The introduction of competition in the natural 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 use 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. The general objective of this master thesis is to represent the strategic behavior of agents in a market environment, in which they will try to maximize their profit. Each agent maximizes its profit facing a captive demand where it behaves as a monopoly, and interacting with the rest of the agents in the hub, in the electricity market and in foreign markets, holding different market behaviors. The equilibrium is stated as a Mixed Complementarity Problem and the three methodologies which are used for solving the problem are described. Finally, in order to overcome the limitations of the Mixed Complementary Problem (MCP) formulation, an iterative optimization problem is proposed.