Latest Papers:
Combining Energy Networks, WP-EM-36, with Jan Abrell, available here
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.

Long-run Cost Functions for Electricity Transmission , WP-EM-36, with Juan Rosellón and Ingo Vogelsang, available here
Abstract: Electricity transmission has become the pivotal industry segment for electricity restructuring. Yet, little is known about the shape of transmission cost functions. Reasons for this can be a lack of consensus about the definition of transmission output and the complexitity of the relationship between optimal grid expansion and output expansion. Knowledge of transmission cost functions could help firms (Transcos) and regulators plan transmission expansion and could help design regulatory incentive mechanisms. We explore transmission cost functions when the transmission output is defined as point-to-point transactions or financial transmission right (FTR) obligations and particularly explore expansion under loop-flows. We test the behavior of FTR-based cost functions for distinct network topologies and find evidence that cost functions defined as FTR outputs are piecewise differentiable and that they contain sections with negative marginal costs. Simulations, however, illustrate that such unusual properties do not stand in the way of applying price-cap incentive mechanisms to real-world transmission expansion.

8^th Conference on Applied Infrastructure Research, Berlin, 8-9 October, 2010. For more information please click here.