Natural Gas Distribution in European Countries: Market Structure, Cost Drivers and Efficiency

Gas distribution is one of the main phases of the gas supply chain. It has the objective of delivering gas to the final customer through local gas pipelines, operating under a natural monopoly regime. The Gas sector has undergone significant changes over the last few decades, given the introduction of European Directives that have led to the unbundling of structurally monopolistic activities from potentially competitive ones. The decision to analyze and understand how unbundling changes have influenced the companies operating in the sector of gas distribution imply the need to understand how the Italian and European distribution networks are structured. In particular, after a review of the empirical literature, the analysis focuses on structural similarities in the sample of Italian companies, through the analysis of main distribution cost drivers (economies of scale, density and proximity) and tries to identify differences due to productive inefficiency. In the European context, however, substantial and peculiar differences emerge for certain countries, not always due to economic reasons, making it possible to compare them with the Italian model. The analysis, therefore, firstly refers to the Italian distribution system and then focuses on Europe trying to explain why in certain Countries a single distribution company exists.