A cost function for the natural gas transmission industry: further considerations

This article studies the cost function for the natural gas transmission industry. In addition to a tribute to H.B. Chenery, it firstly offers some further comments on a recent contribution (Yépez, 2008): a statistical characterization of long-run scale economies, and a simple reformulation of the long-run problem. An extension is then proposed to analyze how the presence of seasonally-varying flows modifies the optimal design of a transmission infrastructure. Lastly, the case of a firm that anticipates a possible random rise in its future output is also studied to discuss the optimal degree of excess capacity to be built into a new transmission infrastructure

The technology and cost structure of a natural gas pipeline: Insights for costs and rate-of-return regulation

This note details a complete microeconomic characterization of the physical relationships between input use and the level of output of a simple point-to-point gas pipeline system and uses it to contribute to the public policy discussions pertaining to the economic regulation of natural gas pipelines. We show that the engineering equations governing the design and operations of that infrastructure can be approximated by a single production equation of the Cobb-Douglas type. We use that result to inform three public policy debates. First, we prove that the long-run cost function of the infrastructure formally verifies the condition for a natural monopoly, thereby justifying the need of regulatory intervention in that industry. Second, we examine the conditions for cost-recovery in the short-run and contribute to the emerging European discussions on the implementation of short-run marginal cost pricing on interconnector pipelines. Lastly, we analyze the performance of rate-of-return regulation in that industry and inform the regulatory policy debates on the selection of an appropriate authorized rate of return. We highlight that, contrary to popular belief, the socially desirable rate of return can be larger than the market price of capital for that industry

Security of supply and retail competition in the European gas market: Some model-based insights

In this paper, we analyze the impact of uncertain disruptions in gas supply upon gas retailer contracting behavior and consequent price and welfare implications in a gas market characterized by long-term gas contracts using a static Cournot model. In order to most realistically describe the economical situation, our representation divides the market into two stages: the upstream market that links, by means of long-term contracts, producers in exporting countries (Russia, Algeria, etc.) to local retailers who bring gas to the consuming countries to satisfy local demands in the downstream market. Disruption costs are modeled using short-run demand functions. First we mathematically develop a general model and write the associated KKT conditions, then we propose some case studies, under iso-elasticity assumptions, for the long- short-run inverse-demand curves in order to predict qualitatively and quantitatively the impacts of supply disruptions on Western European gas trade. In the second part, we study in detail the German gas market of the 1980s to explain the supply choices of the German retailer, and we derive interesting conclusions and insights concerning the amounts and prices of natural gas brought to the market. The last part of the paper is dedicated to a study of the Bulgarian gas market, which is greatly dependent on the Russian gas supplies and hence very sensitive to interruption risks. Some interesting conclusions are derived concerning the necessity to economically regulate the market, by means of gas amounts control, if the disruption probability is high enough

Export diversification and resource-based industrialization: the case of natural gas

For resource-rich economies, primary commodity specialization has often been considered to be detrimental to growth. Accordingly, export diversification policies centered on resource-based industries have long been advocated as effective ways to moderate the large variability of export revenues. This paper discusses the applicability of a mean-variance portfolio approach to design these strategies and proposes some modifications aimed at capturing the key features of resource processing industries (presence of scale economies and investment lumpiness). These modifications help make the approach more plausible for use in resource-rich countries. An application to the case of natural gas is then discussed using data obtained from Monte Carlo simulations of a calibrated empirical model. Lastly, the proposed framework is put to work to evaluate the performances of the diversification strategies implemented in a set of nine gas-rich economies. These results are then used to formulate some policy recommendations

Joining the CCS Club! Insights from a Northwest European CO2 Pipeline Project

The large-scale diffusion of Carbon Capture and Storage (CCS) imposes the construction of a sizeable CO2 pipeline infrastructure. This paper analyzes the conditions for a widespread adoption of CCS by a group of emitters that can be connected to a common pipeline system. It details a quantitative framework capable of assessing how the tariff structure and the regulatory constraints imposed on the pipeline operator impact the overall cost of CO2 abatement via CCS. This modeling framework is applied to the case of a real European CO2 pipeline project. We find that the obligation to use cross-subsidy-free pipeline tariffs has a minor impact on the minimum CO2 price required to adopt the CCS. In contrast, the obligation to charge non-discriminatory prices can either impede the adoption of CCS or significantly raises that price. Besides, we compared two alternative regulatory frameworks for CCS pipelines: a common European organization as opposed to a collection of national regulations. The results indicate that the institutional scope of that regulation has a limited impact on the adoption of CCS compared to the detailed design of the tariff structure imposed to pipeline operators

Cryomagma ascent on Europa

Europa's surface exhibits morphological features which, associated with a low crater density, might be interpreted to have formed as a result of recent cryovolcanic activity. In particular, the morphology of smooth deposits covering parts of the surface, and their relationship to the surrounding terrains, suggest that they result from liquid extrusions. Furthermore, recent literature suggests that the emplacement of liquid-related features, such as double ridges, lenticulae and chaos could result from the presence of liquid reservoirs beneath the surface. We model the ascent of liquid water through a fracture or a pipe-like conduit from a subsurface reservoir to Europa\textquoteright s surface and calculate the eruption time-scale and the total volume extruded during the eruption, as a function of the reservoir volume and depth. We also estimate the freezing time of a subsurface reservoir necessary to trigger an eruption. Our model is derived for pure liquid water and for a briny mixture outlined by Kargel (1991): 81 wt% H$_{2}$O + 16 wt% MgSO$_{4}$ + 3 wt% Na$_{2}$SO$_{4}$. Considering compositional data for salt impurities for Europa, we discuss the effect of MgSO$_{4}$ and Na$_{2}$SO$_{4}$ on the cryomagma freezing time-scale and ascent. For plausible reservoir volumes and depths in the range of $\mathrm{10^{6}\:m^{3}\leq V\leq10^{10}\:m^{3}}$ and $\mathrm{1\:km\leq H\leq10\:km}$ respectively, the total extruded cryolava volume ranges from $10^{3}\,\mathrm{m^{3}}$ to $10^{8}\,\mathrm{m^{3}}$ and the duration of the eruptions varies from few minutes to few tens of hours. The freezing time-scale of the cryomagma reservoirs varies with cryomagma composition and the temperature gradient in the ice shell: from a few days to a thousand years for pure water cryomagma, and from a few months to a 10$^{4}$ years for briny cryomagma.Comment: 31 pages, 11 figure

Capturing industrial CO2 emissions in Spain: Infrastructures, costs and break-even prices

This paper examines the conditions for the deployment of large-scale pipeline and storage infrastructure needed for the capture of CO2 in Spain by 2040. It details a modeling framework that allows us to determine the optimal infrastructure needed to connect a geographically disaggregated set of emitting and storage clusters, along with the threshold CO2 values necessary to ensure that the considered emitters will make the necessary investment decisions. This framework is used to assess the relevance of various policy scenarios, including (i) the perimeter of the targeted emitters for a CCS uptake, and (ii) the relevance of constructing several regional networks instead of a single grid to account for the spatial characteristics of the Spanish peninsula. We find that three networks naturally emerge in the north, center and south of Spain. Moreover, the necessary CO2 break-even price critically depends on the presence of power stations in the capture perimeter. Policy implications of these findings concern the elaboration of relevant, pragmatic recommendations to envisage CCS deployment locally, focusing on emitters with lower substitution options toward low-carbon alternatives

Construction of a fuel demand function portraying interfuel substitution, a system dynamics approach

Most of the recent numerical market equilibrium models of natural gas markets use imperfect competition assumptions. These models are typically embedded with an oversimplified representation of the demand side, usually a single-variable affine function, that does not capture any dynamic adjustment to past prices. To remedy this, we report an effort to construct an enhanced functional specification using the system dynamics-based model of Moxnes (1987, 1990). Thanks to a vintage representation of capital stock, this putty-clay model captures the effect of both past and current energy prices on fuel consumption. Using a re-calibrated version of this model, we first confirm the pertinence of this modeling framework to represent interfuel substitutions at different fuel prices in the industrial sector. Building on these findings, a dynamic functional specification of the demand function for natural gas is then proposed and calibrated.

Austerlitz. La prose fictionnelle de W.G. Sebald au miroir du roman de Balzac

L'intertexte balzacien dans Austerlitz de Sebald

Austerlitz. La prose fictionnelle de W.G. Sebald au miroir du roman de Balzac

L'intertexte balzacien dans Austerlitz de Sebald