17th session of seminars on research in energy economics at paris-sciences-lettres
Date
10 décembre 2014Lieu
University Paris Dauphine-PSLDescription
Programme and Presentations
The Seminar on Research in Energy Economics at Paris-Sciences-Lettres (PSL) is jointly organized by the CERNA (MINES PARIS TECH), the CGEMP (Université Paris-Dauphine), the Chaire European Electricity Markets (Université Paris-Dauphine), and i3 (l’Institut interdisciplinaire de l’innovation), members of PSL. It is animated by François LEVEQUE (MINES PARIS TECH), Dominique FINON (Chaire European Electricity Markets, CNRS-CIRED) and Patrice GEOFFRON (Director, CGEMP, Université Paris-Dauphine).
Michele POLO, Director of the IEFE and Professor of Economics, Bocconi University, Milano
Liberalizing the gas industry: Take-or-pay contracts, retail competition and wholesale trade
Presentation
This paper examines retail competition in a liberalized gas market. Vertically integrated firms run both wholesale activities (buying gas from the producers under take-or-pay obligations) and retail activities (selling gas to final customers). The market is decentralized and the firms decide which customers to serve, competing then in prices. We show that TOP clauses limit the incentives to face-to-face competition and determine segmentation and monopoly pricing even when entry of new competitors occurs. The development of wholesale trade, instead, may induce generalized entry and retail competition. This equilibrium outcome is obtained if a compulsory wholesale market is introduced, even when firms are vertically integrated, or under vertical separation of wholesale and retail activities when firms can use only linear bilateral contracts.
Paper published in The International Journal of Industrial Organization 2013, 31(1), pp.64-82 (co-authored with Carlos. SCARPA).
Olivier MASSOL, Economist, Centre d’Economie-Gestion, IFP School
Market power across the Channel: Are Continental European gas markets isolated from the British liquid market?
Presentation
This paper examines the efficiency of the arbitrages performed between two regional markets for wholesale natural gas linked by a capacity-constrained pipeline system. We develop a switching regime specification to (i) detect if the observed spatial arbitrages satisfy the integration notion that all arbitrage opportunities between the two markets are being exploited, and (ii) decompose the observed spatial price differences into factors such as transportation costs, transportation bottlenecks, and the oligopolistic behavior of the arbitrageurs. Our framework incorporates a test for the presence of market power and it is thus able to distinguish between the physical and behavioral constraints to marginal cost pricing. We use the case of the “Interconnector” pipeline as an application, linkingBelgium and the UK. Our empirical findings show that all the arbitrage opportunities between the two zones are being exploited but confirm the presence of market power.
Working Paper co-authored with Albert Banal-Estañol (Pompeu Fabra Univ. and City University).