Combining Energy Networks

Electricity Markets Working Papers WP-EM-38

23 Pages Posted: 11 Feb 2010

See all articles by Jan Abrell

Jan Abrell

ETH Zürich - Centre for Energy Policy and Economics (CEPE)

Hannes Weigt

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel

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Date Written: February 10, 2010

Abstract

Electricity markets rely on other upstream energy markets like oil, gas, and coal to provide the necessary fuel for generation. As both the electricity market and those upstream markets rely on networks, congestion on one market may lead to changes on another. In this paper we analyze the interaction of the natural gas network with the electricity network applying a partial equilibrium approach. The model is applied to a stylized representation of the European energy markets. We apply the model to two cases: first the impact of a supply reduction of natural gas on both markets by cutting imports from Russia, and second, the impact of the introduction of an emission restriction on electricity generation. Since natural gas can be an input for electricity generation, gas price level changes alter the generation dispatch. However, the network character of both markets leads to further effects that are not obvious on first sight. Congestion between markets and particular effects due to loop flows in electricity markets can lead to price and quantity effects in markets far away from the initial cause of market changes.

Keywords: Electricity network, Natural gas network, Europe, MCP

Suggested Citation

Abrell, Jan and Weigt, Hannes, Combining Energy Networks (February 10, 2010). Electricity Markets Working Papers WP-EM-38, Available at SSRN: https://ssrn.com/abstract=1550712 or http://dx.doi.org/10.2139/ssrn.1550712

Jan Abrell

ETH Zürich - Centre for Energy Policy and Economics (CEPE) ( email )

8092 Zurich
Switzerland

Hannes Weigt (Contact Author)

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel ( email )

Basel, 4051
Switzerland

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