10th session of seminars on research in energy economics at paris-sciences-lettres
Abstract
The Seminar on Research in Energy Economics at Paris-Sciences-Lettres is jointly organized by the CERNA, the CGEMP, the Chaire European Electricity Markets, Mines ParisTech and University Paris-Dauphine. It is animated by François LEVEQUE (CERNA et MINES PARIS TECH) and Dominique FINON (Chaire European Electricity Markets, CNRS-CIRED).
Miguel VASQUEZ (Economics Institute, UFRJ-Rio and Florence School of Regulation) présentera son article récemment paru dans Energy Policy, Designing the European Gas Market: More Liquid but Less Natural by Entry-Exit Zonal Tariff.
Presentation
Hannes WEIGT (Assistant-Professor of Energy Economics, Basle University) présentera son papier, co-écrit avec A. Neumann et J. Rosellon, Removing Cross-Border Capacity Bottlenecks in the Network of European Natural Gas Market: the Need of an Incentive Regulation.
Presentation
Summary of the presentations
Designing the European Gas Market: More Liquid but Less Natural by Entry-Exit Zonal Tariff, By Miguel VASQUEZ:
Designing a gas market is defining how the commodity, the transmission and ancillary services are traded. The European Union has built the commoditization of natural gas through the socialization of several costs of trade. This choice aims at obtaining more liquid markets through the creation of virtual hubs of trade. These virtual hubs ignore most of the network and of the physical gas flows by the creation of entry/exit market zones. Thus the definition of such market zones has tied EU markets inside virtual trading zones (national or sub-national). We show the consequences and the challenges of this European choice, especially at the cross-zone level (often at country cross-border). Once “entry/exit” trade arrangements are preferred, the use of market-based mechanisms for cross-zone decisions like network investments becomes less natural. (Paper published in Economics of Energy and Environmental Policy).
Removing Cross-Border Capacity Bottlenecks in the Network of European Natural Gas Market : the need of an incentive regulation, By Hannes WEIGT:
The paper proposes a merchant-regulatory framework to promote investment in the European natural gas network infrastructure based on a price cap over two-part tariffs. As suggested by Vogelsang (2001) and Hogan et al. (2010), a profit maximizing network operator facing this regulatory constraint will intertemporally rebalance the variable and fixed part of its two-part tariff so as to expand the congested pipelines, and converge to the Ramsey-Boiteaux equilibrium. We confirm this with actual data from the European natural gas market by comparing the bi-level price-cap model with a base case, a no-regulation case, and a welfare benchmark case, and by performing sensitivity analyses. In all cases, the incentive model is the best decentralized regulatory alternative that efficiently develops the European pipeline system. (DIW Working Paper co-authored with Anne Neumann -DIW Berlin- and José Rosselon -DIW and CIDE-Mexico-).
