Prospects of gas supply until 2020 in Europe and its relevance for the power sector in the context of emission trading

With the liberalization of energy markets and the introduction of an emission trading system, electricity production by gas combined cycle power plants has significantly increased in the European Union in recent years. Reasons for the significant increase include the short construction time for gas power plants and the favourable investment costs. One further advantage is the relatively low CO₂ emissions of gas power plants. Thus, a key option for reducing emissions is seen in the increased use of gas for power production. Model calculations from various models show that an increase of gas power production is expected. In general, however, the interdependencies of the different markets (gas, electricity and CO₂) as well as the country-specific gas supply options, determined by pipelines and liquefied natural gas (LNG), are neglected. As the competitiveness of gas power plants mainly depends on the availability of gas and the gas price, a novel model that integrates electricity, gas, and CO₂- emission markets assuming perfect competition will be presented. The objective of this paper is to analyse the long-term relevance of the gas market for the electricity sector in the European Union in the context of CO₂-emission reduction targets.