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A stochastic generalized Nash-Cournot model for the northwestern European natural gas markets: The S-GaMMES model

  • Ibrahim Abada
  • Pierre-André Jouvet

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 captures the possible fuel substitution that can be made between oil, coal, and natural gas in the overall fossil energy consumption. The demand is made random because of the oil price fluctuations and we take into account long-term contracts in an endogenous way. The model is applied to represent the European natural gas market and to forecast, until 2035, after a calibration process, patterns of consumption, prices, production, and long-term contract prices and volumes. In terms of policy implications, we show how the perception of the oil price’s uncertainty modifies the gas long-term contract volumes in Europe between the producers and the midstreamers. Finally, we define the value, gain and loss of the stochastic solution adapted to our model and calculate them for each market actor.

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File URL: http://ns212578.ovh.net/RePEc/cec/wpaper/13-09-Cahier-R-2013-08-Abada-and-Jouvet.pdf
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Paper provided by Chaire Economie du Climat in its series Working Papers with number 1308.

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Length: 44 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:cec:wpaper:1308
Contact details of provider: Web page: http://ns212578.ovh.net
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  1. 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.
  2. Harker, Patrick T., 1991. "Generalized Nash games and quasi-variational inequalities," European Journal of Operational Research, Elsevier, vol. 54(1), pages 81-94, September.
  3. Ibrahim Abada & Vincent Briat & Steve A. Gabriel & Olivier Massol, 2011. "A Generalized Nash-Cournot Model for the North-Western European Natural Gas Markets with a Fuel SubstitutionDemand Function: The GaMMES Model," EconomiX Working Papers 2011-8, University of Paris West - Nanterre la Défense, EconomiX.
  4. Lee, Junsoo & List, John A. & Strazicich, Mark C., 2006. "Non-renewable resource prices: Deterministic or stochastic trends?," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 354-370, May.
  5. 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.
  6. 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.
  7. 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.
  8. Wietze Lise and Benjamin F. Hobbs, 2009. "A Dynamic Simulation of Market Power in the Liberalised European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 119-136.
  9. 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.
  10. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1998. "Increased Competition on the Supply Side of the Western European Natural Gas Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 1-18.
  11. 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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