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Multi-agent mixed complementary simulation of natural gas upstream market liberalization in China

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  • Gong, Chengzhu
  • Wu, Desheng
  • Gong, Nianjiao
  • Qi, Rui

Abstract

Natural gas supply in regionally interlinked but not perfectly integrated market might lead to high supply side concentration, which fails to achieve economic efficiency and requires market reform. This paper proposes an integration of multi-agent framework and mixed complementary model to outline the gas market-oriented reform schemes and examines the outcomes of gas upstream liberalization in China. In accordance with existing gas market conditions, several counterfactual scenarios are designed to simulate the influences of gas upstream market liberalization. We find that under the current Cournot competition, existing suppliers will exert market power, which results in a 2.18% reduction in gas supply and the retail price rise by 6.72%, but the market power performance will be mitigated with the improvement of infrastructure and the entrance of new gas supplier. Moreover, the current most appropriate price subsidy rate for import gas is about 6%, otherwise the average retail price will increase by 5.57% when the import subsidy is fully elimination. It can be concluded that the liberalization reform of China’s gas upstream market need priority ensure the diversified competition of suppliers, gradually promote the unbundling of infrastructure such as pipelines and gas storage, and then appropriately reduce the level of import subsidy.

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  • Gong, Chengzhu & Wu, Desheng & Gong, Nianjiao & Qi, Rui, 2020. "Multi-agent mixed complementary simulation of natural gas upstream market liberalization in China," Energy, Elsevier, vol. 200(C).
    • Handle: RePEc:eee:energy:v:200:y:2020:i:c:s0360544220306423
    DOI: 10.1016/j.energy.2020.117535
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