GASMOD- Dynamic- A Dynamic Model of the European Natural Gas Market and Network∗ Submitted to the Annual Conference 2009 of the Verein für Socialpolitik

We develop a dynamic model of the European natural gas market and network that is based on the static GASMOD-Net model. GASMOD-Net includes the export and transit infrastructure of natural gas and its simultaneous use by several players within Europe in a simulation model of the European natural gas market. The dynamic ex-tension focusses on endogeneous investments in the transport infrastructure (pipelines, LNG facilities) in an open-loop approach. Several players (producers, exporters, and wholesale traders) are active in the market(s) and their individual optimization prob-lems together with the network constraints give rise to a complementarity model in the MCP format. We discuss more complex equilibrium concepts than the open-loop approach and its mathematical counterpart, the MCP model, and identify their limits for numerical simulations. Applying the GASMOD-Dynamic model to a small, styl-ized data set of the European natural gas market shows the importance of the transit infrastructure between European countries, in particular in an imperfect market.