Combining Energy Networks

CER-ETH – Center of Economic Research at ETH Zurich, Working Paper 16/238

31 Pages Posted: 22 Mar 2016

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: March 21, 2016

Abstract

Electricity markets depend on upstream energy markets to supply the fuels needed for generation. Since these markets rely on networks, congestion in one can quickly produce changes in another. In this paper we develop a combined partial equilibrium market model which includes the interactions of natural gas and electricity networks. We apply the model to a stylized representation of Europe’s electricity and natural gas markets to illustrate the upstream and downstream feedback effects which are not obvious on first sight. We find that both congestion and loop-flow effects in electricity markets impact prices and quantities in markets located far from the initial cause of the market changes.

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

JEL Classification: L94, L95, C63

Suggested Citation

Abrell, Jan and Weigt, Hannes, Combining Energy Networks (March 21, 2016). CER-ETH – Center of Economic Research at ETH Zurich, Working Paper 16/238 , Available at SSRN: https://ssrn.com/abstract=2752369 or http://dx.doi.org/10.2139/ssrn.2752369

Jan Abrell (Contact Author)

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

8092 Zurich
Switzerland

Hannes Weigt

WWZ, Wirtschaftswissenschaftliche Fakultät der Universität Basel ( email )

Basel, 4051
Switzerland

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