Direkt zum Inhalt

Removing Cross-Border Capacity Bottlenecks in the European Natural Gas Market: A Proposed Merchant-Regulatory Mechanism

Discussion Papers 1145, 20 S.

Anne Neumann, Juan Rosellón, Hannes Weigt


get_appDownload (PDF  451 KB)

Published in: Networks and Spatial Economics 15 (2015), 1, S.149-181


We propose a merchant-regulatory framework to promote investment in the European natural gas network infrastructure based on a price cap over two-part tariffs. As suggested by Vogelsang (2001) and Hogan et al. (2010), a profit maximizing network operator facing this regulatory constraint will intertemporally rebalance the variable and fixed part of its two-part tariff so as to expand the congested pipelines, and converge to the Ramsey-Boiteaux equilibrium. We confirm this with actual data from the European natural gas market by comparing the bi-level price-cap model with a base case, a no-regulation case, and a welfare benchmark case, and by performing sensitivity analyses. In all cases, the incentive model is the best decentralized regulatory alternative that efficiently develops the European pipeline system.

Keywords: regulation, transportation network, investment
Frei zugängliche Version: (econstor)