TITLE

Gas Storage Valuation: Price Modelling v. Optimization Methods

AUTHOR(S)
Bjerksund, Petter; Stensland, Gunnar; Vagstad, Frank
PUB. DATE
January 2011
SOURCE
Energy Journal;2011, Vol. 32 Issue 1, p203
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
In the literature, one approach is to analyse gas storage within a simple one-factor price dynamics framework that is solved to optimality. We follow an alternative approach, where the market is represented by a forward curve with daily granularity, the price uncertainty is represented by six factors, and where we impose a simple and intuitive storage strategy. Based on UK natural gas market price data, we obtain the gas storage value using our approach, and compare with results from a one-factor model as well as with perfect foresight. We find that our approach captures much more of the true flexibility value than the one-factor model
ACCESSION #
57215272

 

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