Investments in a Combined Energy Network Model: Substitution between Natural Gas and Electricity?

Natural gas plays an important role in the future development of electricitymarkets as it is the least emission intensive fossil generation option whileadditionally providing the needed flexibility in plant operation to deal withintermittent renewable generation. As both the electricity and the naturalgas market rely on networks, congestion on one market may lead to changeson another. In addition, investments in one market have an impact in theother and may even become substitutes for one another. The objective of thispaper is to develop a dynamic model representation of coupled natural gasand electricity network markets to test the potential interaction with respectto investments. The model is tested under simplified conditions as well asfor a stylized European network setting. The results indicate that there isa potential for investment-substitution and significant market interactionsthat warrants the application of coupled models especially with regard tosimulations of long term system developments.