Energy policies and risks on energy markets; a cost-benefit analysis

The key question dealt with in this report is whether and how governments should be involved in taking measures regarding security of energy supply. In order to answer this question, we developed a framework for cost-benefit analysis and applied this framework to a number of policy options. Read also the press release and accompanying�document ' Increasing the reliability of electricity production: a cost-benefit analysis '. The options chosen vary from government investments in strategic oil stocks to financial incentives for consumers to reduce their consumption of electricity. The set of options comprises several types of governmental action, including subsidies, regulation and government investments. Moreover, the selection includes measures meant to address risks on all three major energy markets: oil, natural gas, and electricity. The general picture following from the cases studied is that security of supply measures are hardly ever beneficial to welfare: benefits of policy measures do generally not outweigh costs. From an economic point of view, therefore, it would be often wiser to accept consequences of supply disruptions than to pursue security of supply at any cost. This implies that governments should exercise caution in imposing measures regarding security of supply. If serious market failure is detected, careful attention should be paid to the design of the corrective measure. Establishing and maintaining well-functioning markets appears to be an efficient approach in realising a secure supply of energy. That approach would include removal of entry barriers, securing equal access to essential facilities and increasing transparency of markets.

Multi-agent Electricity Markets and Smart Grids Simulation with Connection to Real Physical Resources

The increasing penetration of distributed energy sources, mainly based on renewable generation, calls for an urgent emergence of novel advanced methods to deal with the associated problems. The consensus behind smart grids (SGs) as one of the most promising solutions for the massive integration of renewable energy sources in power systems has led to the development of several prototypes that aim at testing and validating SG methodologies. The urgent need to accommodate such resources require alternative solutions. This chapter presents a multi-agent based SG simulation platform connected to physical resources, so that realistic scenarios can be simulated. The SG simulator is also connected to the Multi-Agent Simulator of Competitive Electricity Markets, which provides a solid framework for the simulation of electricity markets. The cooperation between the two simulation platforms provides huge studying opportunities under different perspectives, resulting in an important contribution to the fields of transactive energy, electricity markets, and SGs. A case study is presented, showing the potentialities for interaction between players of the two ecosystems: a SG operator, which manages the internal resources of a SG, is able to participate in electricity market negotiations to trade the necessary amounts of power to fulfill the needs of SG consumers.This work has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement N. 641794 (project DREAM-GO). It has also received FEDER Funds through the COMPETE program and National Funds through FCT under the project UID/EEA/00760/2013. The authors gratefully acknowledge the valuable contribution of Bruno Canizes, Daniel Paiva, Gabriel Santos and Marco Silva to the work presented in the chapter.info:eu-repo/semantics/publishedVersio

A Multi-Agent Energy Trading Competition

The energy sector will undergo fundamental changes over the next ten years. Prices for fossil energy resources are continuously increasing, there is an urgent need to reduce CO2 emissions, and the United States and European Union are strongly motivated to become more independent from foreign energy imports. These factors will lead to installation of large numbers of distributed renewable energy generators, which are often intermittent in nature. This trend conflicts with the current power grid control infrastructure and strategies, where a few centralized control centers manage a limited number of large power plants such that their output meets the energy demands in real time. As the proportion of distributed and intermittent generation capacity increases, this task becomes much harder, especially as the local and regional distribution grids where renewable energy generators are usually installed are currently virtually unmanaged, lack real time metering and are not built to cope with power flow inversions (yet). All this is about to change, and so the control strategies must be adapted accordingly. While the hierarchical command-and-control approach served well in a world with a few large scale generation facilities and many small consumers, a more flexible, decentralized, and self-organizing control infrastructure will have to be developed that can be actively managed to balance both the large grid as a whole, as well as the many lower voltage sub-grids. We propose a competitive simulation test bed to stimulate research and development of electronic agents that help manage these tasks. Participants in the competition will develop intelligent agents that are responsible to level energy supply from generators with energy demand from consumers. The competition is designed to closely model reality by bootstrapping the simulation environment with real historic load, generation, and weather data. The simulation environment will provide a low-risk platform that combines simulated markets and real-world data to develop solutions that can be applied to help building the self-organizing intelligent energy grid of the future

Price Setting in a Forward-Looking Customer Market

We propose a new explanation for price rigidity. We show that if consumers form habits in individual goods, then firms face a time- inconsistency problem. The consumers’ habits imply that low prices in the future help attract customers in the present. Firms would therefore like to promise low prices in the future. But when the future arrives they have an incentive to exploit consumers’ habits and price gouge. In this model, unlike the standard no-habit model, nominal price rigidity is an equilibrium outcome. Equilibrium price rigidity can be sustained because rigid prices help firms overcome the time-inconsistency problem. If customers have incomplete information about firms’ desired prices, the optimal policy for the firm is to commit to a “price cap”. Our model therefore provides an explanation for the simultaneous existence of a rigid regular price and frequent sales, a pattern that is difficult to reconcile with existing menu cost models or price rigidity. Our model also explains survey evidence on firms’ fears of adverse customer reactions to price changes, the fact that firms make open commitments to customers not to change their prices, the tendency of price rigidity to increase with the frequency of repeat purchases and the tendency of prices to be more rigid to existing customers than new customers.Time-inconsistency, Price Rigidity, Habit Formation, Asymmetric Information.

Water and electricity in Nigeria

The report reviews privatisation solutions promoted by the World Bank and the IFC, and critical responses to them

Mainstreaming New Renewable Energy Technologies

This paper outlines the benefits, obstacles and options for governments to support international markets for technology development. International markets for new energy technologies offer greater scope, thereby increasing the incentives and opportunities for technology improvements. As the market is supported by more independent governments, the confidence of technology developers and producers that future markets for their products will exist is increasing, thus enabling capital access and inducing R&D investment and exploration of improved production processes. The bigger markets also allow for international competition, thus allowing for the application of the best available technology. The government challenge to induce sufficient RD&D remains and with international markets the benefits and costs of national governments free-riding on international effort needs to be addressed. Finally, we discuss how international co-operation can be used to evolve the energy system in such a way that it can integrate new technologies at minimum cost

Economic opportunities of AMI implementation : a review

Advanced Metering Infrastructure (AMI) is rapidly becoming a key element for the modernization and disruption of power grids, generating benefits and opportunities to all actors involved in its implementation. In order to guarantee a correct deployment of AMI, a wide knowledge of its advantages and challenges is needed, that takes into account previous experiences and latest advances that have been made in the field. In this paper, a review of literature is used as a mean to collect the relevant information concerning AMI, so as to conclude which are the opportunities that AMI provides to all parties involved. This is achieved by searching in the most important data bases and specialized sources such as IEEE and IEA. It was found that this infrastructure, does indeed help improve efficiency and leads to positive economic effects impacting variables like costs and prices

The gas chain: influence of its specificities on the liberalisation process. NBB Working Papers. No. 122, 16 November 2007

Like other network industries, the European gas supply industry has been liberalised, along the lines of what has been done in the United Kingdom and the United States, by opening up to competition the upstream and downstream segments of essential transmission infrastructure. The aim of this first working paper is to draw attention to some of the stakes in the liberalisation of the gas market whose functioning cannot disregard the network infrastructure required to bring this fuel to the consumer, a feature it shares with the electricity market. However, gas also has the specific feature of being a primary energy source that must be transported from its point of extraction. Consequently, opening the upstream supply segment of the market to competition is not so obvious in the European context, because, contrary to the examples of the North American and British gas markets, these supply channels are largely in the hands of external suppliers and thus fall outside the scope of EU legislation on the liberalisation and organisation of the internal market in gas. Competition on the downstream gas supply segment must also adapt to the constraints imposed by access to the grid infrastructure, which, in the case of gas in Europe, goes hand in hand with the constraint of dependence on external suppliers. Hence the opening to competition of upstream and downstream markets is not "synchronous", a discrepancy which can weaken the impact of liberalisation. Moreover, the separation of activities necessary for ensuring free competition in some segments of the market is coupled with major changes in the way the gas chain operates, with the appearance of new markets, new price mechanisms and new intermediaries. Starting out from a situation where gas supply was in the hands of vertically-integrated operators, the new regulatory framework that has been set up must, on the one hand, ensure that competitive forces can be given free rein, and, on the other hand, that free and fair competition helps the gas chain to operate coherently, at lower cost and in the interests of consumers, for whom the stakes are high as natural gas is an important input for many industrial manufacturing processes, even a "commodity" almost of basic necessity