The Development of Gas Hubs in Europe

Bocconi Centre for Research on Energy and Environmental Economics and Policy Working Paper n. 76

27 Pages Posted: 18 Dec 2014

See all articles by Caterina Miriello

Caterina Miriello

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy

Michele Polo

Bocconi University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 16, 2014

Abstract

This paper investigates the development of wholesale markets for natural gas at the different stages of market liberalization. We identify three steps in the process: wholesale trade initially develops to cope with balancing needs when the shippers and suppliers segments become more fragmented; once the market becomes more liquid, it turns out to be a second source of gas procurement in alternative to long term contracts; finally, to manage price risk financial instruments are traded. We review in detail the different regulatory measures that must be introduced to create an efficient and functioning wholesale gas market. Finally, we analyze the evolution of gas hubs in the UK, the Netherlands, Germany and Italy in terms of market rules and market liquidity. We argue that each of these country cases can be easily located into the evolutionary path we have highlighted at the beginning, with the UK and the Netherlands leading the process, Germany and Italy constrained by limited supply; Italy is also showing an interesting counterfactual.

Keywords: natural gas markets, gas balancing, market liquidity

JEL Classification: Q48, L95

Suggested Citation

Miriello, Caterina and Polo, Michele, The Development of Gas Hubs in Europe (December 16, 2014). Bocconi Centre for Research on Energy and Environmental Economics and Policy Working Paper n. 76. Available at SSRN: https://ssrn.com/abstract=2539095 or http://dx.doi.org/10.2139/ssrn.2539095

Caterina Miriello (Contact Author)

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy ( email )

viale Filippetti, 9
Milan, 20122
Italy

Michele Polo

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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