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Complementarity problems in restructured natural gas markets

  • GABRIEL, Steven
  • SMEERS, Yves
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    The restructuring of the gas industry did not so far generate the same modeling activity as in electricity. While the literature of activity in electricity market models is now abundant, it is still rather scant on the gas side. This paper surveys some of the existing models and attempts to take advantage of the wealth of knowledge available in electricity in order to develop relevant models of restructured gas markets. The presentation is in three parts. The first one gives a bueprint of the market architectures inherited from the European and North American gas legislation. It also introduces a prototype optimization model and its interpretation in terms of perfect competition between agents operating on the restructured market. The second part extends the model to the case where marketers have market power. The third part considers more complex issues related to regulation of access to the network and existence of market power with different types of agents. Equilibrium models are commonly formulated as complementarity problems and the same mathematical programming framework is adopted here. Many models are single stage; there are generally easy to formulate and well known computationally. But many phenomena require two stage models that are much more intricate and on which much less is known. The paper is thus also aimed at pinpointing possible avenues for mathematical programming research.

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    File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/0eddf49c-865c-4fd7-9aa0-5855a9811222/coredp_2005_37.pdf
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    Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2005037.

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    Date of creation: 00 May 2005
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    Handle: RePEc:cor:louvco:2005037
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    1. Greenhut, M L & Ohta, H, 1976. "Related Market Conditions and Interindustrial Mergers," American Economic Review, American Economic Association, vol. 66(3), pages 267-77, June.
    2. Cremer, Helmuth & Gasmi, Farid & Laffont, Jean-Jacques, 2003. "Access to Pipelines in Competitive Gas Markets," Journal of Regulatory Economics, Springer, vol. 24(1), pages 5-33, July.
    3. 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.
    4. Breton, Michele & Zaccour, Georges, 2001. "Equilibria in an asymmetric duopoly facing a security constraint," Energy Economics, Elsevier, vol. 23(4), pages 457-475, July.
    5. 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.
    6. Boucher, Jacqueline & Smeers, Yves, 1996. "Optimal development planning of gas reserves," Energy Economics, Elsevier, vol. 18(1-2), pages 25-47, April.
    7. Rolf Golombek & Eystein Gjelsvik & Knut Einar Rosendahl, 1995. "Effects of Liberalizing the Natural Gas Markets in Western Europe," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 85-112.
    8. Gabriel, Steven A. & Vikas, Shree & Ribar, David M., 2000. "Measuring the influence of Canadian carbon stabilization programs on natural gas exports to the United States via a 'bottom-up' intertemporal spatial price equilibrium model," Energy Economics, Elsevier, vol. 22(5), pages 497-525, October.
    9. Gabriel, Steven A. & Zhuang, Jifang & Kiet, Supat, 2005. "A large-scale linear complementarity model of the North American natural gas market," Energy Economics, Elsevier, vol. 27(4), pages 639-665, July.
    10. Greenhut, M L & Ohta, H, 1979. "Vertical Integration of Successive Oligopolists," American Economic Review, American Economic Association, vol. 69(1), pages 137-41, March.
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