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Natural Gas Market Module - NEMS Documentation

August 2022

Introduction

The Natural Gas Market Module (NGMM) is the component of the National Energy Modeling System (NEMS) that represents the North American natural gas transmission and distribution system. We developed the NEMS as the third in a series of computer-based energy-economy modeling systems. EIA and its predecessor, the Federal Energy Administration, have used NEMS to analyze and project U.S. domestic markets to provide 25–30 year projections and to analyze a broad range of energy issues at both national and regional levels. Although the NEMS was first used in 1992, the model is updated each year; updates in individual modules range from simple historical data updates to completely replacing submodules. The NGMM was an entirely new model we incorporated into the NEMS for the Annual Energy Outlook 2018, replacing the Natural Gas Transmission and Distribution Module (NGTDM).

Documentation purpose and scope

This report provides a reference document for model analysts, users, and the public that defines the objectives of the Natural Gas Market Module (NGMM) in the NEMS. This report also fulfills EIA’s legal obligation to provide adequate documentation in support of our models under Public Law 93-275, Federal Energy Administration Act of 1974, Section 57(B)(1) (as amended by Public Law 94-385, Energy Conservation and Production Act).

In this report, we:
  • Describe NGMM’s basic design
  • Provide details on the methodology employed
  • Detail the model inputs, outputs, and key assumptions

Because we first incorporated the NGMM into the NEMS for the Annual Energy Outlook 2018, the documentation also describes our decision to build a new model in the NEMS to represent natural gas markets and the differences between the NGMM and its predecessor.

Model summary

The NGMM models the transmission, distribution, and pricing of natural gas in the NEMS. The model code is written in AIMMS and is a quadratic program that maximizes consumer plus producer surplus, minus transportation costs, subject to linear mass balance and capacity constraints. For all months in a year, the NGMM determines the production, flows, and prices of natural gas in a state-level representation of the U.S. pipeline network3 and a regional-level representation of the Canada’s and Mexico’s pipeline network , connecting domestic and foreign supply regions with demand regions (Figure 1.14). End-use natural gas consumption by sector, storage, and liquefied natural gas (LNG) export terminals are all integrated into the network by demand region. The NGMM projects:

  • Lease fuel
  • Plant fuel
  • Pipeline fuel
  • Fuel used for liquefaction
  • LNG export capacity builds
  • Pipeline capacity expansions
  • Distributor tariffs at the delivered price of natural gas to domestic consumers
Because most other NEMS modules operate on an annual basis, NGMM results are generally passed to other NEMS modules as annual totals or quantity-weighted annual average prices.

Figure 1.1 NGMM natural gas pipeline network representation

Documentation organization

The document is intended to provide a framework for understanding how the natural gas market is represented in EIA’s long-term U.S. energy market projections. Subsequent chapters of this report provide:

  • Overview of natural gas market representation in the NEMS (Chapter 2)
  • NGMM model structure, design, and mathematical formulation (Chapter 3)• NGMM input data preoprocessing routines, including model initialization in the first year (Chapter 4)
  • NGMM output data post-processing routines and reporting to other NEMS modules (Chapter 5)
  • NGMM assumptions, inputs, and outputs (Chapter 6)

It includes a number of appendices to support the material presented in the main body of the report:

  • Appendix A: Model abstract
  • Appendix B: References
  • Appendix C: Table relating the variable names used in the documentation to the specific variable, or identifier, used in the model code
  • Appendix D: Table relating the equations presented in the documentation to the relevant procedure in the code
  • Appendix E: Table relating the input data parameters in the model code and the data input files from which they are read and where detailed descriptions of the input data, including variable names, definitions, sources, units and derivations can be found
  • Appendix F: Table that Identifies all global data passed between other NEMS modules and the NGMM, as well as a brief description of the variable and the related module, where applicable
  • Appendix G: The derivation of all empirical estimations used in the NGMM

Model archival citation

This documentation refers to the NEMS Natural Gas Market Module as archived for the Annual Energy Outlook 2022 (AEO2022). The model contact is

Stephen York
Energy Information Administration
U.S. Department of Energy
1000 Independence Avenue, SW
Washington, D.C. 20585
(202) 596-0595
stephen.york@eia.gov

See full report