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Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach

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  • Abada, Ibrahim
  • Briat, Vincent
  • Massol, Olivier

Abstract

Most of the recent numerical market partial equilibrium models of natural gas markets use imperfect competition assumptions. These models are typically embedded with a simple representation of the demand side, usually a single-variable, linear, inverse demand function, that does not capture any dynamic adjustment to past prices or energy substitution. To remedy this, we report an effort to construct an enhanced functional specification using the system dynamics-based model of [27,28]. This putty-clay model uses a vintage representation of capital stock to capture the effect of both past and current energy prices on fuel consumption. Using a re-calibrated version of this model, we first confirm the pertinence of this modeling framework to represent interfuel substitution at different fuel prices in the industrial sector. Building on these findings, a dynamic functional specification of the demand function for natural gas is then proposed and calibrated.

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  • Abada, Ibrahim & Briat, Vincent & Massol, Olivier, 2013. "Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach," Energy, Elsevier, vol. 49(C), pages 240-251.
  • Handle: RePEc:eee:energy:v:49:y:2013:i:c:p:240-251
    DOI: 10.1016/j.energy.2012.10.063
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    Cited by:

    1. Ibrahim Abada & Steven Gabriel & Vincent Briat & Olivier Massol, 2013. "A Generalized Nash–Cournot Model for the Northwestern European Natural Gas Markets with a Fuel Substitution Demand Function: The GaMMES Model," Networks and Spatial Economics, Springer, vol. 13(1), pages 1-42, March.
    2. Romagnoli, Francesco & Barisa, Aiga & Dzene, Ilze & Blumberga, Andra & Blumberga, Dagnija, 2014. "Implementation of different policy strategies promoting the use of wood fuel in the Latvian district heating system: Impact evaluation through a system dynamic model," Energy, Elsevier, vol. 76(C), pages 210-222.
    3. Armin Leopold, 2016. "Energy related system dynamic models: a literature review," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 24(1), pages 231-261, March.
    4. Wang, Jianzhou & Jiang, Haiyan & Zhou, Qingping & Wu, Jie & Qin, Shanshan, 2016. "China’s natural gas production and consumption analysis based on the multicycle Hubbert model and rolling Grey model," Renewable and Sustainable Energy Reviews, Elsevier, vol. 53(C), pages 1149-1167.
    5. Armin Leopold, 2016. "Energy related system dynamic models: a literature review," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 24(1), pages 231-261, March.
    6. repec:eee:energy:v:129:y:2017:i:c:p:246-254 is not listed on IDEAS
    7. Xie, Chunping & Hawkes, Adam D., 2015. "Estimation of inter-fuel substitution possibilities in China's transport industry using ridge regression," Energy, Elsevier, vol. 88(C), pages 260-267.
    8. Karmellos, M. & Kopidou, D. & Diakoulaki, D., 2016. "A decomposition analysis of the driving factors of CO2 (Carbon dioxide) emissions from the power sector in the European Union countries," Energy, Elsevier, vol. 94(C), pages 680-692.
    9. Ibrahim Abada, 2012. "A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets with a fuel substitution demand function: The S-GaMMES model," Working Papers 1202, Chaire Economie du climat.
    10. Qudrat-Ullah, Hassan, 2014. "Green power in Ontario: A dynamic model-based analysis," Energy, Elsevier, vol. 77(C), pages 859-870.
    11. Hall, Lisa M.H. & Buckley, Alastair R., 2016. "A review of energy systems models in the UK: Prevalent usage and categorisation," Applied Energy, Elsevier, vol. 169(C), pages 607-628.
    12. Qudrat-Ullah, Hassan, 2017. "How to enhance the future use of energy policy simulation models through ex post validation," Energy, Elsevier, vol. 120(C), pages 58-66.
    13. Ibrahim Abada & Pierre-André Jouvet, 2013. "A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets: The S-GaMMES model," Working Papers 1308, Chaire Economie du climat.
    14. Siddiqui, Sauleh & Christensen, Adam, 2016. "Determining energy and climate market policy using multiobjective programs with equilibrium constraints," Energy, Elsevier, vol. 94(C), pages 316-325.
    15. Qudrat-Ullah, Hassan, 2015. "Independent power (or pollution) producers? Electricity reforms and IPPs in Pakistan," Energy, Elsevier, vol. 83(C), pages 240-251.
    16. Darda, Md Abud & Guseo, Renato & Mortarino, Cinzia, 2015. "Nonlinear production path and an alternative reserves estimate for South Asian natural gas," Renewable and Sustainable Energy Reviews, Elsevier, vol. 47(C), pages 654-664.
    17. Ibrahim Abada, 2012. "Study of the evolution of the northwestern European natural gas markets using S-GaMMES," Working Papers 1203, Chaire Economie du climat.

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