Implementation of the Hogan, Rosellón, and Vogelsang (HRV) incentive mechanism into the InTraGas model

The European natural gas market is characterised by higher demand than available supply from
own resources. Therefore Europe is a gas net-importing region. The costs of potential problems or
disruptions establish the need for an environment which stimulates sufficient investments in transmission
line capacities. We examine the effects of the introduction of the recently developed Hogan,
Rosellón and Vogelsang (HRV) incentive mechanism into the European natural gas market. In the
simulations with GAMS we can confirm all results expected from theory. The validity of these simulation
results is confirmed in a structural analysis, which comprised the variation of different exogenous
input parameters. Therefore we conclude that the HRV incentive mechanism as a regulatory regime
for the European natural gas market would be an advisable alternative, which should be considered
in future discussions. (author's abstract)