Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/38741
Authors: 
Lochner, Stefan
Year of Publication: 
2009
Series/Report no.: 
EWI workingpaper 09,02
Abstract: 
Especially in the short-term, prices in natural gas markets are not exclusively determined by overall supply and demand, but also by the availability of the transport infrastructure. If transportation capacity is scarce, prices may form in (local) residual markets and can differ regionally. If available, storages provide intertemporal arbitrage possibilities which also impact prices. Temporal and regional price differences, in turn, determine the value of storage and transport capacity if either one is scarce. This paper applies an analytical framework for a simple pipeline grid with a storage over two periods to illustrate the interdependencies between prices, scarce capacity and capacity value. The theoretically optimal transportation and storage tariffs are described analytically. The optimal pipeline investment size is shown to be related to marginal storage investment and a function of the discounted and aggregated cost of congestion over the lifetime's asset.
Subjects: 
Natural gas
transport capacity
storage
investment
prices
JEL: 
Q41
D41
L50
P42
Document Type: 
Working Paper

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