Analysis and Design of Interruptible Gas Contract in China under Energy Market Reform

Jian Chai and Liqiao Wang
Additional contact information
Jian Chai: International Business School, Shaanxi Normal University, Xi’an 710062, China
Liqiao Wang: International Business School, Shaanxi Normal University, Xi’an 710062, China

Sustainability, 2020, vol. 12, issue 2, 1-15

Abstract: Under the background of economic development, energy security and environmental demands, the development of clean and low-carbon energy has promoted natural gas and non-fossil energy to become the main direction of world energy development. China’s natural gas consumer market has wide seasonal peaks and valleys. Because China’s natural gas peak shaving practices have some problems, we concluded that interruptible gas management has become a viable short-term emergency peak shaving method for natural gas systems in the transition period. In this paper, we take Shaanxi Province as an example. From the perspective of option pricing, this paper explains the method of using interruptible gas management to deal with the short-term supply and demand imbalance of natural gas. Therefore, we propose an interruptible gas contract trading mode, discuss the content of the interruptible gas contract and the relevant market organization form, and try to use the Black–Scholes model to calculate the option price of the interruptible gas contract. Finally, based on the price of interruptible gas and the option price of the interruptible gas contract to meet the maximum capacity shortage constraint, a provincial natural gas pipeline network company’s optimal purchase model for the interruptible gas was established, and the model was solved using the dynamic queuing method. The results show that the interruptible gas contract can not only reduce the market risk of the provincial natural gas pipeline network company and maintain the stable operation of the gas pipeline, but also reduce the cost of the interruptible users and make up for gas shortage losses.

Keywords: energy market reform; peak shaving; interruptible gas contract; Black–Scholes model (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2071-1050/12/2/506/pdf (application/pdf)
https://www.mdpi.com/2071-1050/12/2/506/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:12:y:2020:i:2:p:506-:d:306830

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().