Building Competitive Gas Markets in the EU

Building Competitive Gas Markets in the EU

Regulation, Supply and Demand

The Loyola de Palacio Series on European Energy Policy

Jean-Michel Glachant, Michelle Hallack and Miguel Vazquez

This highly unique book focuses on market design issues common to most EU gas markets, particularly in the context of closer integration. It explores in detail the characteristics and requirements of national gas markets in Europe which are constructed as virtual hubs based on entry/exit schemes as a requirement of European law.

Chapter 5: Opening a market for gas flexibility?

Michelle Hallack

Subjects: economics and finance, competition policy, energy economics


This chapter shows that, in a context of highly heterogeneous supply and demand patterns, the cost of inefficient regulation is significantly higher than in the past. The offer of gas network services is the outcome of infrastructures’ rules and already installed infrastructures. Decisions concerning how to use these installed infrastructures are the central variable determining the portfolio of services offered. Thus, the kind and the number of flexibility services provided by the network are a consequence of infrastructure use, as with any other network service. In Chapters 2 and 3 we showed that gas-fired power plant (GFPP) gas demand and the increased participation of liquefied natural gas (LNG) supply increased the demand for flexibility services. In turn, this chapter shows that provision of flexibility to deal with GFPP and LNG demand necessarily implies the flexible use of networks. In Europe, the use of network infrastructures is constrained by a set of rules defining rights and duties of shippers and pipeline operators. These rules define the services that installed infrastructures may, must and must not offer. Thus far this set of rules delineating the possible uses of infrastructures have been national ones, but based on EU-wide principles. The EU defines the directions that national regulators should follow to achieve a liberalized gas market. Historically, the gas sector in Europe was characterized by state-owned vertically integrated monopolies.

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