This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
USAEE/IAEEDiagnostic metrics for the adequate development of
efficient-market baseload natural gas storage capacity
Research QuestionWhat diagnostic metrics can be used to assess the adequatedevelopment of efficient-market baseload natural gas storagecapacity?
MotivationAnalytical tools for the aforementioned assessment are notfound in the literature. FERC can use them to monitorpotential and unintended deterrent effects of their ownregulatory policies on natural gas storage development.
2 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Literature Review
No direct precedent in literature of commodity storage.
1 [Pyatt, 1978]:
• Minimizing production cost Vs. maximizing profit.
2 [Williams and Wright, 1991]:
• Classic textbook on structural models of storage.
3 [Schroder-Amundsen, 1991]:
• Constrained production, storage, and distribution.
4 [Urıa and Williams, 2007]:
• Influence of NYMEX futures in net injection profiles.
Four variables for each market environment changing over time:
P Price
u Storage flow (control variable)
N Inventory level (state variable)
θ Shadow value of inventory
Four stages:
A Injection
B Binding storage capacity
C Withdrawal
D Stockout
10 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Model Input Parameters
Parameter Name Value Parameter Units
Time horizon, T 12 Months
Seasonal amplitude, a 0.5 Unitless
Reservation price, A 20 USD / NG flow
Demand slope, B 2 USD / NG flow
Constant supply, Q0 5 NG flow
Initial inventory, N (0) 0 NG volume
11 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Operation profiles with 25% NSC under PC
12 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Operation Profiles with 25% NSC under Monopoly
13 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Working Gas in Underground Storage (2015-2016)
14 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Henry Hub Forward Curves (2014, 2015)
15 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
First Diagnostic MetricActual vs. Theoretical Storage Capacity
16 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Second Diagnostic MetricActual vs. Theoretical Maximum Seasonal Price Spread (MSPS)
17 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Third and Fourth Diagnostic MetricsComplement the first two metrics
Market power in storage operations when
[corr
(Pt ,Q
Dt
)> 0]
and
[|corr (Pt ,Nt)| > 0] .
18 / 28
USAEE/IAEE
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Conclusions
• Four diagnostic metrics were formulated based on:
1 Market equilibrium of storage capacity investments2 Maximum seasonal price spread (MSPS)3 Correlation between price and consumption4 Correlation between price and inventory
• Metrics can be adjusted for seasonal amplitude uncertainty
• Metrics can be used by agencies like FERC
• Follow-up research:
1 Adjust metrics for asymmetric seasonality2 Explain forward curve shape at Henry Hub and others
Binding SCO: Stages A and BUnder Perfect Competition and Monopoly
Perfect CompetitionVariable Stage A Stage B
t ∈ (τ1, τ2) ∈ [τ2, τ3]
P∗∗ P I [= Pτ1 (Q0)] Pt (Q0)
u∗∗ 1B
[P I − Pt (Q0)
]> 0 0
N∗∗ f (τ1, t) N
θU∗∗t 0 P (Q0) ≥ 0
Monopoly
P∗ 12
[P I + Pt (Q0)
]Pt (Q0)
u∗ 12u
∗∗ 0
N∗ 12 f (τ1, t) N
θU∗t 0 P (Q0) ≥ 0
24 / 28
Backup Slides
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Binding SCO: Stages C and DUnder Perfect Competition and Monopoly
Perfect CompetitionVariable Stage C Stage D
t ∈ (τ3, τ4) ∈ [τ4, T ] ∧ [0, τ1]
P∗∗ PW [= Pτ3 (Q0)] Pt (Q0)
u∗∗ 1B
[PW − Pt (Q0)
]< 0 0
N∗∗ N + f (τ3, t) 0
θU∗∗t 0 0
Monopoly
P∗ 12
[PW + Pt (Q0)
]Pt (Q0)
u∗ 12u
∗∗ 0
N∗ N + 12 f (τ3, t) 0
θU∗t 0 0
25 / 28
Backup Slides
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
First Diagnostic MetricActual vs. Theoretical Storage Capacity
Where actualstorage capacity
(ASC) falls
Storage CapacityAdequacy
(Qualification)Potential issues
ASC < SC∗EQ
Insufficient (Redflag)
Physical constraints inthe natural gasinfrastructure or
regulatory deterrents.
SC∗EQ ≤ ASC ≤ SC∗∗
EQ
May be subject tomarket power(Yellow flag)
Market power or anyof the above.
SC∗∗EQ < ASC
Sufficient (Greenflag)
Excessive investmentthat may not be
recovered.
26 / 28
Backup Slides
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
Second Diagnostic MetricActual vs. Theoretical Price Fluctuations
Where actual annualprice spread (APS)
falls
Storage CapacityAdequacy
(Qualification)Potential issues
APS >aA (1 + sin bτ1)
Insufficient (Redflag)
Physical constraints inthe natural gasinfrastructure or
regulatory deterrents.
MBSC (τ1) ≤ APS ≤aA (1 + sin bτ1)
May be subject tomarket power(Yellow flag)
Market power or anyof the above.
APS < MBSC (τ1) N.A.Inconsistentestimates.
27 / 28
Backup Slides
ErnestoGuzman,Ph.D.
Question
Lit review
Methodology
Findings
Operations
Predictions
Metrics
Conclusions
Backup
Non-binding
Binding
Metrics
References
References Cited I
Pyatt, G. (1978).Marginal costs, prices, and storage.The Economic Journal, 88:749 – 762.
Schroder-Amundsen, E. (1991).Seasonal Fluctuations of Demand and Optimal Inventoriesof a Non-Renewable Resource Such as Natural Gas.Resources and Energy, 13(3):285–306.
Urıa, R. and Williams, J. (2007).The supply of storage for natural gas in california.The Energy Journal, 28(3):31–50.
Williams, J. C. and Wright, B. D. (1991).Storage and Commodity Markets.Cambridge University Press, Cambridge, 1st edition.