The Impact of Physics on Pricing in Energy Networks
17 Pages Posted: 9 Jul 2015
Date Written: July 9, 2015
Pricing of access to energy networks is an important issue in liberalized energy sectors because of the natural monopoly character of the transport infrastructures. We introduce a general pricing framework for potential-driven and arbitrarily structured energy transport networks. In different specifications of our general pricing model we discuss first- and second-best pricing results and compare different pricing outcomes of potential-free and potential-driven energy flow models. Our results show that regarding the laws of physics leads to significantly different pricing results on networks and that these differences can only be seen in sufficiently complex networks as they can be found in real-world situations.
Keywords: Energy Networks, Pricing, Gas Networks, Electricity Networks
JEL Classification: C61, L94, L95
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