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Seasonal Flexibility in the European Natural Gas Market

Abstract:
This paper focuses on seasonal demand swings in the European natural gas market. We quantify and compare the role of different flexibility options (domestic production, gas storage, and pipeline and LNG imports) to assess European demand fluctuations in monthly resolution. We contribute to the existing literature on seasonal flexibility by addressing the problem with a mathematical gas market optimization model. Our paper provides valuable empirical insights into the decline of gas production in northwestern Europe. Furthermore, we focus on how specific flexibility features differ between pipeline supplies and LNG supplies and between gas imports and storage dispatch. In terms of methodology, we construct a bottom-up market optimization model and publish the complete source code (which is uncommon for gas market models). Furthermore, we propose a new metric—the scaled coefficient of variation—to quantify the importance of supply sources for seasonal flexibility provision.

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Keywords: European gas market, Market modeling, Seasonality

DOI: 10.5547/01956574.43.1.irie

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Published in Volume 43, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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