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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
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