Does ‘more’ equal ‘better’? – Analyzing the impact of diversification strategies on infrastructure in the European gas market

The paper investigates investments in gas infrastructure considering uncertainties in European gas markets. Furthermore, the study addresses the question of whether (more) diversification provides a (better) security of supply improvement. Thus, a stochastic optimization approach is introduced. The...

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Bibliographic Details
Published in:Energy policy Vol. 153; p. 112232
Main Author: Hauser, Philipp
Format: Journal Article
Language:English
Published: Kidlington Elsevier Ltd 01.06.2021
Elsevier Science Ltd
Subjects:
Diversification
Diversification strategy
energy
Energy policy
European gas market
Flexibility
Gas pipelines
Impact analysis
imports
Infrastructure
Infrastructure investment
Investments
Liquefied natural gas
Markets
Optimization
Pipelines
Policy making
Prices
Russia
Shortages
Stochastic programming approach
Strategies
Transport buildings, stations and terminals
Ukraine
Uncertainty
Ukraine
Russia
Infrastructure investment
Stochastic programming approach
Diversification strategy
European gas market
ISSN:0301-4215, 1873-6777
Online Access:Get full text
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Summary:The paper investigates investments in gas infrastructure considering uncertainties in European gas markets. Furthermore, the study addresses the question of whether (more) diversification provides a (better) security of supply improvement. Thus, a stochastic optimization approach is introduced. The uncertainties focus on 2030 and 2045 in three dimensions, namely the Ukraine gas transit, future LNG prices, and the expected gas demand. Considering three diversification strategies, the model GAMAMOD-EU.sto optimizes investments in pipelines, LNG import terminals and gas storages as well as the gas dispatch. Results illustrate trade-offs between optimal gas supply and diversification strategies. Investments in pipelines to North African suppliers are made across all strategies, while the building of the Nord Stream 2 pipeline depend on the respective diversification strategy. Diversification through LNG quota changes the dispatch results significantly. Investments in storages are almost not necessary over all strategies, however, storages provide flexibility to prevent supply shortages, when diversification strategies are applied. Conclusion for policy makers regarding what is needed for preventing malinvestments and high costs in the European gas market are: an enhanced relationship between Russia and the EU and a clear vision on the role of gas in the future European energy system that reduces demand uncertainty. •A stochastic optimization approach for analyzing the European gas market is proposed.•Investment and dispatch decisions concerning gas market uncertainties.•Diversification leads to increasing system costs and determine infrastructure.•Minimum LNG import quota do not significantly prevent pipeline expansion.•Reliable EU-Russia-relationship and clear visions on the Green Deal prevent malinvestments.
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ISSN:0301-4215
1873-6777
DOI:10.1016/j.enpol.2021.112232