Impact of Natural Gas Distribution Network Structure and Operator Strategies on Grid Economy in Face of Decreasing Demand

Daniel Then, Christian Spalthoff, Johannes Bauer, Tanja M. Kneiske and Martin Braun
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Daniel Then: Department of Grid Planning and Operation, Fraunhofer Institute for Energy Economics and Energy System Technology, 34119 Kassel, Germany
Christian Spalthoff: Department of Grid Planning and Operation, Fraunhofer Institute for Energy Economics and Energy System Technology, 34119 Kassel, Germany
Johannes Bauer: Stadtwerke Bamberg Energy and Water Supply Company, 96052 Bamberg, Germany
Tanja M. Kneiske: Department of Grid Planning and Operation, Fraunhofer Institute for Energy Economics and Energy System Technology, 34119 Kassel, Germany
Martin Braun: Department of Grid Planning and Operation, Fraunhofer Institute for Energy Economics and Energy System Technology, 34119 Kassel, Germany

Energies, 2020, vol. 13, issue 3, 1-33

Abstract: Currently, natural gas provides more than a third of the energy used in European residential buildings. As part of the general decline of fossil fuels, this gas consumption is predicted to drop in several countries by 25–100% by 2050. We model a decline in gas consumption in 57 urban German distribution grids looking for the influence of grid-specific factors and different distribution network operator (DNO) strategies on grid charges. We find a functional relationship between grid length and customer amount described by a power law, with an exponent correlated with structural grid parameters. The disordered structure inherent to grids typically results in a decline in grid costs much slower than the corresponding demand. We introduce a simplified yearly cash flow calculation model based on the power law and validate it against mixed integer linear optimization. A comparison of the total costs of operation and resulting grid charges for several scenarios and strategies estimates the effects on DNO business models. Depending on a combination of DNO’s strategy and customers’ exit pattern, grid charges may increase, accelerating the substitution of gas-bound technologies that might develop into a self-reinforcing feedback loop, leading to grid defection.

Keywords: grid economics; natural gas grid; grid planning; strategic decision making; grid defection (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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