Long-run market equilibria in coupled energy sectors: A study of uniqueness

32 Pages Posted: 29 Mar 2021

See all articles by Jonas Egerer

Jonas Egerer

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Veronika Grimm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - School of Business & Economics

Julia Grübel

Friedrich-Alexander-Universität Erlangen-Nürnberg

Gregor Zöttl

Friedrich Alexander Universität Erlangen Nürnberg

Date Written: March 25, 2021

Abstract

We propose an equilibrium model for coupled markets of multiple energy sectors. The agents in our model are operators of sector-specific production and sector-coupling technologies, as well as price-sensitive consumers with varying demand. We analyze long-run investment in production capacity in each sector and investment in coupling capacity between sectors, as well as production decisions determined at repeated spot markets. We show that in our multi-sector model, multiplicity of equilibria may occur, even if all assumptions hold that would be sufficient for uniqueness in a single-sector model. We then contribute to the literature by deriving sufficient conditions for the uniqueness of short- and long-run market equilibrium in coupled markets of multiple energy sectors. We illustrate via simple examples that these conditions are indeed required to guarantee uniqueness in general. The uniqueness result is an important step to be able to incorporate the proposed market equilibrium problem in more complex computational multilevel equilibrium models, in which uniqueness of lower levels is a prerequisite for obtaining meaningful solutions. Our analysis also paves the way to understand and analyze more complex sector coupling models in the future.

Keywords: Energy Markets, Sector Coupling, Regional Pricing, Uniqueness, Short- and Long-Run Market Equilibrium

JEL Classification: C62, D41, D58, D60, Q41, R41

Suggested Citation

Egerer, Jonas and Grimm, Veronika and Grübel, Julia and Zöttl, Gregor, Long-run market equilibria in coupled energy sectors: A study of uniqueness (March 25, 2021). Available at SSRN: https://ssrn.com/abstract=3812255 or http://dx.doi.org/10.2139/ssrn.3812255

Jonas Egerer

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Fachbereich Rechtswissenschaft
Schillerstr. 1
Erlangen, DE 91054
Germany

Veronika Grimm

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - School of Business & Economics ( email )

Nuremburg
Germany

Julia Grübel (Contact Author)

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Lange Gasse 20,
Nürnberg, 90403
Germany

Gregor Zöttl

Friedrich Alexander Universität Erlangen Nürnberg ( email )

Nuremburg
Germany

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