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Faculty of Economics

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Silve, F. and Noel, P.

Cost Curves for Gas Supply Security: The Case of Bulgaria

CWPE1056

Abstract: We evaluate the cost-effectiveness of various policy options and infrastructure investment proposals to improve the security of gas supply in Bulgaria, one of the most gas insecure countries in the European Union. We do this by computing ‘security of supply cost curve’ for different gas supply disruption scenarios. The curves show the cumulative amount of security of supply on the horizontal axis and the unit cost of security on the vertical axis. Measures should be implemented by order or rising unit cost until the public authorities’ preferred level of security is achieved. Our results show that a costeffective gas supply security policy for Bulgaria would concentrate on two measures: (1) allowing reverse-flow transactions on the transit pipelines to Greece and Turkey to access the LNG terminals in these countries in case of disruption in Russian gas supplies and, (2) ensuring effective dual-fuel capability for Bulgaria’s heat generation plants. The infrastructure options actually considered by the Bulgarian authorities and gas industry (expanding the withdrawal rate of the Chiren underground gas storage and building a new gas interconnector pipeline with Greece) appear to be much more costly.

Keywords: Natural Gas, Security of Supply, Energy Policy, Bulgaria, EU

JEL Codes: L38 Q48 L5 L95 L98

Author links: Michael Pollitt  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1056.pdf

EPRG Paper Link: 1031

Open Access Link: https://doi.org/10.17863/CAM.1147