Natural gas market expansion and delivery infrastructure costs

Abstract

A methodology is developed to assess the size of potential regional markets for natural gas and the resulting gas delivery infrastructure costs to be incurred in serving these markets, including distribution, transmission, storage and other operating costs. Its application to the New England region suggests that the optimal penetration strategy must involve new customers located in metropolitan areas endowed with distribution lines, and particularly large industrial and electric utility customers. However, connecting communities in remote, low-density rural areas, is, in mot cases, economically unfeasible. The results also suggest that price discrimination favoring residential customers is widespread, pointing to the need for changes in cost allocation and pricing practices.