An Exact Solution Method for Binary Equilibrium Problems with Compensation and the Power Market Uplift Problem

We propose a novel method to find Nash equilibria in games with binary decision variables by including compensation payments and incentive-compatibility constraints from non-cooperative game theory directly into an optimization framework in lieu of using first order conditions of a linearization, or relaxation of integrality conditions. The reformulation offers a new approach to obtain and interpret dual variables to binary constraints using the benefit or loss from deviation rather than marginal relaxations. The method endogenizes the trade-off between overall (societal) efficiency and compensation payments necessary to align incentives of individual players. We provide existence results and conditions under which this problem can be solved as a mixed-binary linear program. We apply the solution approach to a stylized nodal power-market equilibrium problem with binary on-off decisions. This illustrative example shows that our approach yields an exact solution to the binary Nash game with compensation. We compare different implementations of actual market rules within our model, in particular constraints ensuring non-negative profits (no-loss rule) and restrictions on the compensation payments to non-dispatched generators. We discuss the resulting equilibria in terms of overall welfare, efficiency, and allocational equity

Lifting the US Crude Oil Export Ban: A Numerical Partial-Equilibrium Analysis

The upheaval in global crude oil markets and the boom in oil production from shale plays in North America have brought scrutiny on the export ban for crude oil in the United States. This paper examines the global flows and strategic refinery adjustments in a spatial, game-theoretic partial-equilibrium model. We consider de- tailed supply chain infrastructure with multiple crude oil qualities (supply), distinct oil products (demand), as well as specific refinery configurations and modes of transport (mid-stream). Investments in production capacity and infrastructure are endogenous. We compare two development pathways for the global oil market: one projection retaining the US export ban, and a counterfactual scenario lifting the export restrictions. Lifting the US crude ban, we find significant expansion of US sweet crude exports. In the US refinery sector, more heavy sour crude is imported and transformed. While US producers gain, the profits of US refiners decrease, due to reduced market distortions and a more efficient resource allocation. Countries importing US sweet crude benefit from higher product output, while avoiding costly refinery investments. Producers of heavy sour crude (e.g. the Middle East) are incentivised to climb up the value chain to defend their market share and maintain their dominant position

Auction-Based Allocation of Shared Electricity Storage Resources through Physical Storage Rights

This article proposes a new electricity storage business model based on multiple simultaneously considered revenue streams, which can be attributed to different market activities and players. These players thus share electricity storage resources and compete to obtain the right to use them in a dynamic allocation mechanism. It is based on the design of anew periodically organized auction to allocate shared storage resources through physical storage rights between different market players and ac-companying applications. Through such a flexibility platform owners of flexible resources can commercialize their flexible capacity over different applications, while market players looking for additional flexibility can obtain this through a pay-per-use principle and thus not having to make long-term investment commitments. As such, they can quickly adapt their portfolio according to the market situation. Alternatively, through such an allocation mechanism players can effectively share storage re-sources. Players may be incentivized to participate as they can share the investment cost, mitigate risk, exploit economies of scale, overcome regulatory barriers, and merge time-varying and player-dependent flexibility needs. The mechanism allocates the limited storage resources to the most valuable application for each market-clearing, based on the competing players' willingness-to-pay. An illustrative case study is provided in which three players share storage resources that are allocated through a daily auction with hourly market-clearings

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

The MESSAGEix Integrated Assessment Model and the ix modeling platform (ixmp)

The MESSAGE Integrated Assessment Model (IAM) developed by IIASA has been a central tool of energy-environment-economy systems analysis in the global scientific and policy arena. It played a major role in the Assessment Reports of the Intergovernmental Panel on Climate Change (IPCC); it provided marker scenarios of the Representative Concentration Pathways (RCPs) and the Shared Socio-Economic Pathways (SSPs); and it underpinned the analysis of the Global Energy Assessment (GEA). Alas, to provide relevant analysis for current and future challenges, numerical models of human and earth systems need to support higher spatial and temporal resolution, facilitate integration of data sources and methodologies across disciplines, and become open and transparent regarding the underlying data, methods, and the scientific workflow. In this manuscript, we present the building blocks of a new framework for an integrated assessment modeling platform; the \ecosystem" comprises: i) an open-source GAMS implementation of the MESSAGE energy++ system model integrated with the MACRO economic model; ii) a Java/database backend for version-controlled data management, iii) interfaces for the scientific programming languages Python & R for efficient input data and results processing workflows; and iv) a web-browser-based user interface for model/scenario management and intuitive \drag-and-drop" visualization of results. The framework aims to facilitate the highest level of openness for scientific analysis, bridging the need for transparency with efficient data processing and powerful numerical solvers. The platform is geared towards easy integration of data sources and models across disciplines, spatial scales and temporal disaggregation levels. All tools apply best-practice in collaborative software development, and comprehensive documentation of all building blocks and scripts is generated directly from the GAMS equations and the Java/Python/R source code