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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

  • Ibrahim Abada

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

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://ns212578.ovh.net/RePEc/cec/wpaper/12-01_WP_2012-02_Abada.pdf
File Function: First version, 2012
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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
Contact details of provider: Web page: http://ns212578.ovh.net

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  1. Finn Roar Aune & Knut Einar Rosendahl & Eirik Lund Sagen, 2008. "Globalisation of natural gas markets – effects on prices and trade patterns," Discussion Papers 559, Statistics Norway, Research Department.
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  8. Xu, Haiyan & Zhang, ZhongXiang, 2010. "A trend deduction model of fluctuating oil prices," MPRA Paper 26947, University Library of Munich, Germany, revised 17 Nov 2010.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. Golombec, R. & Gjelsvik, E. & Knut, E. & Rosendahl, E., 1996. "Increased Competition on the Supply Side on the Western European Natural Gas Merket," Memorandum 11/1996, Oslo University, Department of Economics.
  18. 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.
  19. Ruud Egging & Steven A. Gabriel & Franziska Holz & Jifang Zhuang, 2007. "A Complementarity Model for the European Natural Gas Market," Discussion Papers of DIW Berlin 732, DIW Berlin, German Institute for Economic Research.
  20. 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.
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