Design of auctions for short-term allocation in gas markets based on virtual hubs

Abstract:

Gas markets based on virtual hubs has been the preferred EU design. Such market designs are based on socializing network flexibility services. Nonetheless, shippers have different preferences about the network flexibility, which are not reflected in current allocation models.

We propose the introduction of auction mechanisms to deal with network service allocation in the short term. The auction aims to represent simultaneously the diversity of players' preferences and the trade-offs implied by network constraints. Two sealed-bid auctions are proposed. On the one hand, an auction with one product allocates network services through the minimization of gas price differences. On the other, a multi-product (gas and line-pack storage) auction is designed to facilitate the revelation of preferences on line-pack storage.

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