A Techno-Economic Perspective on Natural Gas and Its Value Chain

Abstract

We describe the elements and actors in the global natural gas value chains with an emphasis on characteristics relevant for large-scale energy system and market modeling. We give backgrounds on natural gas as a hydrocarbon to provide a rationale and understanding for what functional representations in mathematical programming models aim to represent. Simply taking the most advanced and detailed functional forms for all value chain characteristics and activities will typically result in numerical intractability. One should carefully determine what is needed to address a research question or analyze a business case. Recent advances in mathematical programming do allow solving large models with adequate detail for many types of analysis. We discuss which functional forms and modeling approaches can be appropriate for representing various characteristics in different types of analysis and provide a succinct and general mathematical programming formulation reflecting the optimization problems for different types of actors in the value chain. We provide an implementation for a stylized network using GAMS.