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Investments in a combined energy network model: substitution between natural gas and electricity?

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  • Abrell, Jan
  • Weigt, Hannes

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 intermittent renewable generation. As both the electricity and the natural gas market rely on networks, congestion on one market may lead to changes on another. In addition, investments in one market have an impact in the other and may even become substitutes for one another. The objective of this paper is to develop a dynamic model representation of coupled natural gas and electricity network markets to test the potential interaction with respect to investments. The model is tested under simplified conditions as well as for a stylized European network setting. The results indicate that there is a potential for investment-substitution and significant market interactions that warrants the application of coupled models especially with regard to simulations of long term system developments.

Suggested Citation

  • Abrell, Jan & Weigt, Hannes, 2014. "Investments in a combined energy network model: substitution between natural gas and electricity?," Working papers 2014/05, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2014/05
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    References listed on IDEAS

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    1. Koeppel, Gaudenz & Andersson, Göran, 2009. "Reliability modeling of multi-carrier energy systems," Energy, Elsevier, vol. 34(3), pages 235-244.
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    2. 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.
    3. Çalcı, Baturay & Leibowicz, Benjamin D. & Bard, Jonathan F. & Jayadev, Gopika G., 2024. "A bilevel approach to multi-period natural gas pricing and investment in gas-consuming infrastructure," Energy, Elsevier, vol. 303(C).
    4. Raymond Li & Chi-Keung Woo & Asher Tishler & Jay Zarnikau, 2022. "Price Responsiveness of Residential Demand for Natural Gas in the United States," Energies, MDPI, vol. 15(12), pages 1-22, June.
    5. Li, Raymond & Woo, Chi-Keung & Tishler, Asher & Zarnikau, Jay, 2022. "How price responsive is industrial demand for natural gas in the United States?," Utilities Policy, Elsevier, vol. 74(C).
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    7. Li, Raymond & Woo, Chi-Keung & Tishler, Asher & Zarnikau, Jay, 2022. "Price responsiveness of commercial demand for natural gas in the US," Energy, Elsevier, vol. 256(C).
    8. 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.

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    Keywords

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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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