Both the negotiations on the German coalition agreement and the prices on commodity exchanges were very volatile in February 2018. PPAs are becoming increasingly attractive and the results of the tenders for renewable energies speak for themselves.
Since the beginning of August 2017 the prices on the electricity and commodity markets have been breaking one record after the other. Is it eventually time to pop the corks and finally ring in the end of the lean times? Or is it barely a temporary anomaly? To find an answer, we investigate the causes of the current price development.
Natural gas can either be transported grid-bound via pipelines or liquefied as LNG. In order to increase the energy density, the gas is transported through the pipelines under high pressure (around 80 bar).
In the procurement of gas some singularities have developed, which distinguish the gas market from other commodity markets. Import companies, for example, sometimes have very long-term contracts with gas producers (up to 20 years), a linkage to the oil price and the so called take-or-pay volumes or flexibilities with limits. This chapter aims to familiarize you with the terminology, to understand their meaning and to assess the consequences for the energy industry.
For a long time natural gas has exclusively been a grid-bound energy carrier. In consequence, markets for natural were not globalized, but there were several submarkets (see Tutorial 1) which supplied themselves. Furthermore, the price level in the various markets varied as no arbitrage between the markets was possible.
After giving you an overview of where natural gas is produced and the regions, which are most important for the European natural gas market, the following will provide you an overview of the gas consumption and on which factors it depends on.
Natural Gas is currently the third most important primary energy carrier in the world (after oil and coal). The main advantages of natural gas in comparison to coal or oil are the high efficiency levels that can be achieved when generating electricity from natural gas. As with oil, the global reserves of natural gas are concentrated in a few countries around the world.