The Impact of Uncertainty on the European Energy Market: A Scenario Aggregation Approach

34 Pages Posted: 6 Dec 2013

See all articles by Kjell Arne Brekke

Kjell Arne Brekke

University of Oslo - Frisch Center; University of Oslo - Department of Economics

Rolf Golombek

University of Oslo - Frisch Centre

Michal Kaut

SINTEF Energy Research

Sverre A.C. Kittelsen

Frisch Centre

Stein W. Wallace

Norwegian School of Economics (NHH) - Department of Business and Management Science

Date Written: November 29, 2013

Abstract

We present a simple approach to transform a deterministic numerical model, where several agents simultaneously make decisions, into a stochastic model. This approach, which builds on scenario aggregation, a numerical method developed to solve decision problems under uncertainty, is used to build a large stochastic numerical equilibrium model of the Western European energy markets. We use the stochastic model to analyze the impact of economic and political uncertainty on the Western European energy markets. We demonstrate that the equilibria under uncertainty differ significantly from the deterministic outcomes.

JEL Classification: C630, C680, D580, D810, Q280, Q400, Q540

Suggested Citation

Brekke, Kjell Arne and Brekke, Kjell Arne and Golombek, Rolf and Kaut, Michal and Kittelsen, Sverre A.C. and Wallace, Stein W., The Impact of Uncertainty on the European Energy Market: A Scenario Aggregation Approach (November 29, 2013). CESifo Working Paper Series No. 4500, Available at SSRN: https://ssrn.com/abstract=2363933 or http://dx.doi.org/10.2139/ssrn.2363933

Kjell Arne Brekke

University of Oslo - Frisch Center ( email )

Gaustadalleen 21
N-0349 Oslo
Norway
+47 22 95 88 19 (Phone)
+47 22 95 88 25 (Fax)

HOME PAGE: www.frisch.uio.no

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 22 84 11 69 (Phone)

Rolf Golombek (Contact Author)

University of Oslo - Frisch Centre ( email )

Gaustadalleen 21
N-0349 Oslo
Norway
+47- 2295 8812 (Phone)

HOME PAGE: http://www.frisch.uio.no/cv/rolfgo_eng.html

Michal Kaut

SINTEF Energy Research ( email )

Kolbjørn Hejes vei 1A
Trondheim, NO-7034
Norway

Sverre A.C. Kittelsen

Frisch Centre ( email )

Gaustadalleen 21
N-0317 Oslo
Norway

HOME PAGE: http://www.frisch.uio.no

Stein W. Wallace

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Helleveien 30
Bergen, NO-5045
Norway

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