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Storage and Investments in a Combined Energy Network Model

Author

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  • Hannes Weigt
  • Jan Abrell

Abstract

Natural gas plays an important role in the future development of electricity markets as it is the least emission intensive fossil generation option while additionally providing the needed flexibility in plant operation to deal with intermitted renewable generation. As both the electricity and the natural gas market rely on networks, congestion on one market may lead to changes on another. This influence has been analyzed by Abrell and Weigt (2010) for a static partial equilibrium market model setting showing upstream and downstream feedback effects in a stylized European framework. The objective of this paper is to extend the static model by incorporating dynamic restrictions – particularly seasonal and daily demand variations, natural gas storage, and pumped hydro storage – and an investment representation to evaluate the interaction between both network markets under realistic market conditions.Our approach is based on the static model of Abrell and Weigt (2010) which incorporates directed pipeline flows for the natural gas market and a DC load flow approach for the electricity market in perfectly competitive market environment. We extend the existing approach by firstly incorporating the time dimension: The natural gas market is largely characterized by seasonal patterns whereas the electricity market is defined by daily load levels which requires a matching of the two time frames. Furthermore, the storage options for the two markets are included as storage operators: seasonal storage for natural gas and pumped hydro for electricity. Given this basic dynamic setting in a second step investment options are included. The investment options include the extension of natural gas and electricity network capacities as well as storage facilities in both markets and investment in new natural gas generation capacities. The dynamic model will be applied to a stylized representation of the European market addressing potential future applications and developments via a scenario analysis.The static model approach provides feedback effects due to congestion and flow patterns both in respect to the fact that the electricity market has an influence on the natural gas network and vice versa, as well as that these impacts can lead to higher or lower regional prices accordingly. Within the dynamic setting we evaluate under which conditions these feedback effects occur and whether they are a minor or major driving force of market results. Furthermore, the model allows analyzing the substitution possibilities between electricity and natural gas investments and whether the storability of natural gas can provide benefits for the electricity market. We expect that investments in natural gas infrastructure become a potential alternative for electricity grid investments when a high share of intermitted renewable generation enters the electricity market. Likewise we expect that investments in electricity infrastructure provide a safeguard in case of supply shocks on the natural gas market.

Suggested Citation

  • Hannes Weigt & Jan Abrell, 2012. "Storage and Investments in a Combined Energy Network Model," EcoMod2012 4319, EcoMod.
    • Handle: RePEc:ekd:002672:4319
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    Citations

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    Cited by:

    1. Avraam, Charalampos & Bistline, John E.T. & Brown, Maxwell & Vaillancourt, Kathleen & Siddiqui, Sauleh, 2021. "North American natural gas market and infrastructure developments under different mechanisms of renewable policy coordination," Energy Policy, Elsevier, vol. 148(PB).
    2. Helga Habis & Dávid Csercsik, 2015. "Cooperation with Externalities and Uncertainty," Networks and Spatial Economics, Springer, vol. 15(1), pages 1-16, March.
    3. Jan Abrell & Clemens Gerbaulet & Franziska Holz & Casimir Lorenz & Hannes Weigt, 2013. "Combining Energy Networks: The Impact of Europe's Natural Gas Network on Electricity Markets until 2050," Discussion Papers of DIW Berlin 1317, DIW Berlin, German Institute for Economic Research.
    4. Zhaomiao Guo & Yueyue Fan, 2017. "A Stochastic Multi-agent Optimization Model for Energy Infrastructure Planning under Uncertainty in An Oligopolistic Market," Networks and Spatial Economics, Springer, vol. 17(2), pages 581-609, June.
    5. Jan Abrell and Hannes Weigt, 2016. "Investments in a Combined Energy Network Model: Substitution between Natural Gas and Electricity?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    6. Egerer, Jonas & Grimm, Veronika & Grübel, Julia & Zöttl, Gregor, 2022. "Long-run market equilibria in coupled energy sectors: A study of uniqueness," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1335-1354.
    7. Olaf Jonkeren & Ivano Azzini & Luca Galbusera & Stavros Ntalampiras & Georgios Giannopoulos, 2015. "Analysis of Critical Infrastructure Network Failure in the European Union: A Combined Systems Engineering and Economic Model," Networks and Spatial Economics, Springer, vol. 15(2), pages 253-270, June.
    8. Olufolajimi Oke & Daniel Huppmann & Max Marshall & Ricky Poulton & Sauleh Siddiqui, 2019. "Multimodal Transportation Flows in Energy Networks with an Application to Crude Oil Markets," Networks and Spatial Economics, Springer, vol. 19(2), pages 521-555, June.
    9. Anne Neumann & Juan Rosellón & Hannes Weigt, 2015. "Removing Cross-Border Capacity Bottlenecks in the European Natural Gas Market—A Proposed Merchant-Regulatory Mechanism," Networks and Spatial Economics, Springer, vol. 15(1), pages 149-181, March.
    10. Abrell, Jan & Chavaz, Léo & Weigt, Hannes, 2019. "Dealing with Supply Disruptions on the European Natural Gas Market: Infrastructure Investments or Coordinated Policies?," Working papers 2019/11, Faculty of Business and Economics - University of Basel.
    11. Devine, Mel T. & Bertsch, Valentin, 2018. "Examining the benefits of load shedding strategies using a rolling-horizon stochastic mixed complementarity equilibrium model," European Journal of Operational Research, Elsevier, vol. 267(2), pages 643-658.
    12. Fodstad, Marte & Crespo del Granado, Pedro & Hellemo, Lars & Knudsen, Brage Rugstad & Pisciella, Paolo & Silvast, Antti & Bordin, Chiara & Schmidt, Sarah & Straus, Julian, 2022. "Next frontiers in energy system modelling: A review on challenges and the state of the art," Renewable and Sustainable Energy Reviews, Elsevier, vol. 160(C).
    13. Deane, J.P. & Ó Ciaráin, M. & Ó Gallachóir, B.P., 2017. "An integrated gas and electricity model of the EU energy system to examine supply interruptions," Applied Energy, Elsevier, vol. 193(C), pages 479-490.
    14. Qu, Kaiping & Yu, Tao & Huang, Linni & Yang, Bo & Zhang, Xiaoshun, 2018. "Decentralized optimal multi-energy flow of large-scale integrated energy systems in a carbon trading market," Energy, Elsevier, vol. 149(C), pages 779-791.
    15. Jan Abrell & Friedrich Kunz, 2015. "Integrating Intermittent Renewable Wind Generation - A Stochastic Multi-Market Electricity Model for the European Electricity Market," Networks and Spatial Economics, Springer, vol. 15(1), pages 117-147, March.
    16. Egging-Bratseth, Ruud & Baltensperger, Tobias & Tomasgard, Asgeir, 2020. "Solving oligopolistic equilibrium problems with convex optimization," European Journal of Operational Research, Elsevier, vol. 284(1), pages 44-52.
    17. E. Allevi & A. Gnudi & I. V. Konnov & G. Oggioni, 2022. "Dynamic Spatial Equilibrium Models: an Application to the Natural Gas Spot Markets," Networks and Spatial Economics, Springer, vol. 22(2), pages 205-241, June.
    18. Jan Abrell and Hannes Weigt, 2016. "The Short and Long Term Impact of Europe's Natural Gas Market on Electricity Markets until 2050," The Energy Journal, International Association for Energy Economics, vol. 0(Sustainab).
    19. Jonas Egerer, 2016. "Open Source Electricity Model for Germany (ELMOD-DE)," Data Documentation 83, DIW Berlin, German Institute for Economic Research.

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