The role of demand response in mitigating market power - A quantitative analysis using a stochastic market equilibrium model. ESRI WP635, August 2019

Market power is a dominant feature of many modern electricity markets with an oligopolistic structure, resulting in increased consumer cost. This work investigates how consumers, through demand response (DR), can mitigate against market power. Within DR, our analysis particularly focusses on the impacts of load shifting and self-generation. A stochastic mixed complementarity problem is presented to model an electricity market characterised by oligopoly with a competitive fringe. It incorporates both energy and capacity markets, multiple generating firms and different consumer types. The model is applied to a case study based on data for the Irish power system in 2025. The results demonstrate how DR can help consumers mitigate against the negative effects of market power and that load shifting and self-generation are competing technologies, whose effectivity against market power is similar for most consumers. We also find that DR does not necessarily reduce emissions in the presence of market power

North American Natural Gas Model Impact of Cross-Border Trade with Mexico

Natural gas as a source of energy has attracted a lot of interest as its emissions rate and price are lower than other fossil fuel energy sources. In the U.S., natural gas-fired power generation has been rising, as coal has declined as a share of the fuel mix. Likewise, Mexico recently launched its energy reform with focus on greatly expanding use of natural gas over other fossil fuels, primarily in the energy sector, by opening the market to private investors. These recent economic and policy changes, along with increasing gas production in the U.S. (shale gas boom) are likely to drive the natural gas market in North America in a new direction. For instance, the Annual Energy Outlook 2015 describes the U.S. for the first time as a net exporter of natural gas (via pipelines and LNG) by 2017. In order to study the current North American gas market with its new regulations like the Mexican energy reform, this paper presents the North American Natural Gas Market Model(NANGAM). We propose a long-term partial-equilibrium model of the United States, Mexican, and Canadian gas markets. NANGAM considers more granular details regarding market regions and pipelines in Mexico than other existing models, allows for endogenous infrastructure expansion, and is built in five year time-steps up to 2040, considering three seasons (low, high, and peak demand) for each time-step. NANGAM is calibrated using up-to-date data, which reflects current gas market trends, such as the increasing U.S. shale gas production. Using NANGAM, we assess the implications of the Mexican energy reform using a set of ad-hoc future scenarios. Results from the model show that, in the case of disappointing development of natural gas production in Mexico, the census region US7 (Texas and adjacent states) is the most affected, reaching an increase of natural gas production of up to 12% by 2040 compared to baseline projections

Modelling uncertainty in global natural gas resources and markets

This thesis explores uncertainties in global gas resources and markets. Whilst global gas consumption growth has been strong in recent years, the need to shift the global energy system to net zero has raised significant questions about the role of gas in this transition. In addition to the global context of addressing climate change, gas markets have undergone significant shifts in recent years, driven by a multitude of factors including, but by no means limited to, rapid production growth from unconventional gas in the United States, rapidly increasing demand in China, and increased competition along the gas supply chain. This thesis finds that if global temperatures are to be kept towards-1.5oC, then gas consumption needs to peak now. Significant regional variations were found in this result, with European and North American demand declining from the present day, whilst key Asian markets (including China) see consumption growth to 2035 but then rapid decline. Therefore, several transition risks are identified in this work. This also has implications for price formation across different import markets, with a significant result from this thesis suggesting that prices in major Asian (e.g. China and Japan) markets converge, whilst European prices remain consistently lower. To generate novel insights in this thesis, two models were used, which have been soft linked to generate consistency of inputs and outputs. The existing TIMES Integrated Assessment Model at UCL (TIAM-UCL) provides long-term insights into the role of gas in the wider energy system, particularly under ambitious decarbonisation pathways. Additionally, a new global GAs Production, Trade and Annual Pricing model (GAPTAP), provides a novel representation of gas markets, with insights into regional price formation mechanisms, investment in new fields, the role of associated gas on price formation mechanisms, and variations in government revenues from gas production