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A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets with a fuel substitution demand function: The S-GaMMES model

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  • Ibrahim Abada

    (EDF Research and Development, IFP Energies nouvelles and EconomiX-CNRS, University of Paris 10, France)

Abstract

This article presents a stochastic dynamic Generalized Nash-Cournot model to describe the evolution of the natural gas markets. The major gas chain players are depicted including: producers, consumers, storage, and pipeline operators, as well as intermediate local traders. Our economic structure description takes into account market power and the demand representation tries to capture the possible fuel substitution that can be made between the consumption of oil, coal, and natural gas in the overall fossil energy consumption. The demand is made random because of the oil price fluctuations. We take into account the long-term aspects inherent to some markets, in an endogenous way. This particularity of our description makes the model a Generalized Nash Equilibrium problem that needs to be solved using specialized mathematical techniques. The model has been applied to represent the European natural gas market and to forecast, until 2035, after a calibration process, consumption, prices, production, and long-term contract prices and volumes. Finally, we defined and calculated the value of stochastic solution adapted to our model.

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File URL: http://cec-repec.site11.com/RePEc/cec/wpaper/12-01_WP_2012-02_Abada.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by Chaire Economie du Climat in its series Working Papers with number 1202.

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Length: 46 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:cec:wpaper:1202

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Web page: http://cec-repec.site11.com/
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Related research

Keywords: Energy markets modeling; Game theory; Generalized Nash-Cournot equilibria; Quasi-Variational Inequality; Equilibrium problems; Stochastic programing.;

This paper has been announced in the following NEP Reports:

References

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  1. Franziska Holz & Christian von Hirschhausen & Claudia Kemfert, 2006. "A Strategic Model of European Gas Supply (GASMOD)," Discussion Papers of DIW Berlin 551, DIW Berlin, German Institute for Economic Research.
  2. Gabriel, S.A. & Rosendahl, K.E. & Egging, Ruud & Avetisyan, H.G. & Siddiqui, S., 2012. "Cartelization in gas markets: Studying the potential for a “Gas OPEC”," Energy Economics, Elsevier, vol. 34(1), pages 137-152.
  3. Ibrahim Abada & Vincent Briat & Steve A. Gabriel & Olivier Massol, 2011. "A Generalized Nash-Cournot Model for the North-Western European Natural Gas Markets with a Fuel SubstitutionDemand Function: The GaMMES Model," EconomiX Working Papers 2011-8, University of Paris West - Nanterre la Défense, EconomiX.
  4. Zhuang, Jifang & Gabriel, Steven A., 2008. "A complementarity model for solving stochastic natural gas market equilibria," Energy Economics, Elsevier, vol. 30(1), pages 113-147, January.
  5. Egging, Ruud & Gabriel, Steven A. & Holz, Franziska & Zhuang, Jifang, 2008. "A complementarity model for the European natural gas market," Energy Policy, Elsevier, vol. 36(7), pages 2385-2414, July.
  6. Haiyan Xu & ZhongXiang Zhang, 2011. "A Trend Deduction Model of Fluctuating Oil Prices," Working Papers 2011.22, Fondazione Eni Enrico Mattei.
  7. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1998. "Increased Competition on the Supply Side of the Western European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
  8. Harker, Patrick T., 1991. "Generalized Nash games and quasi-variational inequalities," European Journal of Operational Research, Elsevier, vol. 54(1), pages 81-94, September.
  9. Lise, Wietze & Hobbs, Benjamin F., 2008. "Future evolution of the liberalised European gas market: Simulation results with a dynamic model," Energy, Elsevier, vol. 33(7), pages 989-1004.
  10. S. Gabriel & J. Fuller, 2010. "A Benders Decomposition Method for Solving Stochastic Complementarity Problems with an Application in Energy," Computational Economics, Society for Computational Economics, vol. 35(4), pages 301-329, April.
  11. Maroeska G. Boots, Fieke A.M. Rijkers and Benjamin F. Hobbs, 2004. "Trading in the Downstream European Gas Market: A Successive Oligopoly Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 73-102.
  12. Wietze Lise and Benjamin F. Hobbs, 2009. "A Dynamic Simulation of Market Power in the Liberalised European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 119-136.
  13. Abada, I. & Massol, O., 2011. "Security of supply and retail competition in the European gas market: Some model-based insights," Working Papers 11/04, Department of Economics, City University London.
  14. Perner, J. & Seeliger, A., 2004. "Prospects of gas supplies to the European market until 2030--results from the simulation model EUGAS," Utilities Policy, Elsevier, vol. 12(4), pages 291-302, December.
  15. Gabriel, Steven A. & Zhuang, Jifang & Egging, Ruud, 2009. "Solving stochastic complementarity problems in energy market modeling using scenario reduction," European Journal of Operational Research, Elsevier, vol. 197(3), pages 1028-1040, September.
  16. Finn Roar Aune & Knut Einar Rosendahl & Eirik Lund Sagen, 2008. "Globalisation of natural gas markets – effects on prices and trade patterns," Discussion Papers 559, Research Department of Statistics Norway.
  17. Ruud Egging & Franziska Holz & Steven A. Gabriel, 2009. "The World Gas Model: A Multi-Period Mixed Complementarity Model for the Global Natural Gas Market," Discussion Papers of DIW Berlin 959, DIW Berlin, German Institute for Economic Research.
  18. Egging, Rudolf G. & Gabriel, Steven A., 2006. "Examining market power in the European natural gas market," Energy Policy, Elsevier, vol. 34(17), pages 2762-2778, November.
  19. Hubbard, R Glenn & Weiner, Robert J, 1986. "Regulation and Long-term Contracting in U.S. Natural Gas Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 35(1), pages 71-79, September.
  20. Ibrahim Abada & Vincent Briat & Olivier Massol, 2011. "Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach," EconomiX Working Papers 2011-13, University of Paris West - Nanterre la Défense, EconomiX.
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