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

A Model for the Global Crude Oil Market Using a Multi-Pool MCP Approach

This paper proposes a partial equilibrium model to describe the global crude oil market. Pricing on the global crude oil market is strongly influenced by price indices such as WTI (USA) and Brent (Northwest Europe). Adapting an approach for pool-based electricity markets, the model captures the particularities of these benchmark price indices and their influence on the market of physical oil. This approach is compared to a model with bilateral trade relations as is traditionally used in models of energy markets. With these two model approaches, we compute the equilibrium solutions for several market power scenarios to investigate whether the multi-pool approach may be better suited than the bilateral trade model to describe the crude oil market. The pool-based approach yields, in general, results closer to observed quantities and prices, with the best fit obtained by the scenario of an OPEC oligopoly. We conclude that the price indices indeed are important on the global crude market in determining the prices and flows, and that OPEC effectively exerts market power, but in a non-cooperative way.crude oil, market structure, cartel, pool market, simulation model

The World Gas Market in 2030: Development Scenarios Using the World Gas Model

In this paper, we discuss potential developments of the world natural gas industry at the horizon of 2030. We use the World Gas Model (WGM), a dynamic, strategic representation of world natural gas production, trade, and consumption between 2005 and 2030. We specify a "base case" which defines the business-as-usual assumptions based on forecasts of the world energy markets. We then analyze the sensitivity of the world natural gas system with scenarios: i) the emergence of large volumes of unconventional North American natural gas reserves, such as shale gas; ii) on the contrary, tightly constrained reserves of conventional natural gas reserves in the world; and iii) the impact of CO2-constraints and the emergence of a competing environmental friendly "backstop technology". Regional scenarios that have a global impact are: iv) the full halt of Russian and Caspian natural gas exports to Western Europe; v) sharply constrained production and export activities in the Arab Gulf; vi) heavily increasing demand for natural gas in China and India; and finally vii) constraints on liquefied natural gas (LNG) infrastructure development on the US Pacific Coast. Our results show considerable changes in production, consumption, traded volumes, and prices between the scenarios. Investments in pipelines, LNG terminals and storage are also affected. However, overall the world natural gas industry is resilient to local disturbances and can compensate local supply disruptions with natural gas from other sources. Long-term supply security does not seem to be at risk.Natural gas, investments, reserves, climate policy

Weltölmärkte: Angebotsmacht der OPEC ungebrochen

Trotz des starken Rückgangs der Rohölpreise seit dem Herbst 2008 ist das Preisniveau mit gegenwärtig rund 60 US-Dollar pro Fass immer noch deutlich höher als im langfristigen Durchschnitt. Die Marktmacht der Organisation erdölexportierender Länder (OPEC) ist nach wie vor sehr groß und erklärt einen Teil der Preishöhe. Während sich die Preise auf anderen Rohstoffmärkten wie den Kohlemärkten stärker an den Produktionskosten orientieren, führt die Verbindung von Marktmacht und erheblichen Nachfrageschwankungen auf dem Ölmarkt zu erratischen Ausschlägen der Preise. Modellrechnungen des DIW Berlin zeigen, dass die OPEC zwar keine reine Kartellstrategie durchsetzen kann, ihre einzelnen Mitglieder aber dennoch als starke Oligopolisten die Preise beeinflussen können. Mittelfristig ist aufgrund der Reservenausstattung mit einer noch zunehmenden Bedeutung der OPEC-Länder zu rechnen.Crude oil, Market structure, Cartel, Simulation model, Price indices

Entwicklung der Erdölmärkte: Reservekapazität im Nahen Osten wirkt derzeit stabilisierend

Eine wichtige Ursache für den Anstieg des Ölpreises seit Mitte der 90er Jahre ist die stetig steigende Ölnachfrage. Dazu hat in letzter Zeit das starke Wirtschaftswachstum in den Schwellenländern wesentlich beigetragen. Aktuell dürften die Unruhen in Nordafrika den Ölpreis weiter nach oben getrieben haben. Libyen produzierte im Jahr 2010 1,3 Millionen Barrel pro Tag. Die Ausfälle wurden in erster Linie durch Produktionserhöhungen in Saudi-Arabien kompensiert. Mittelfristig könnten Angebotsausfälle aufgrund von weiteren politischen Umwälzungen im Nahen Osten erhebliche Auswirkungen auf den Weltölhandel und die Rohölpreise haben. Aufgrund seiner freien Förderkapazitäten und seines hohen Produktionsanteils prägt Saudi-Arabien nach wie vor das Angebotsverhalten der OPEC. Auch bei der Bewältigung möglicher zusätzlicher Produktsionausfälle kommt dem Land eine entscheidende Rolle zu.Oil price, oil markets, Middle East North Africa (MENA), oligopoly

South Africa After Paris—Fracking Its Way to the NDCs?

South Africa is facing the triple challenge of (a) fuelling economic development and meeting the growing energy demand; (b) increasing the reliability of the electricity system; and (c) ensuring that domestic greenhouse gas emissions peak no later than 2030 to meet its nationally determined contributions (NDC) under the 2015 Paris Agreement. Recently discovered domestic shale gas reserves are being considered as a potential new energy source to provide clean, reliable and cheap electricity while mitigating greenhouse gas emissions relative to the dominant coal sector. In order to determine if shale gas can play a viable role in solving South Africa's energy trilemma, we apply a country-level version of the integrated assessment model MESSAGEix to analyze and quantify the interdependencies between shale gas, the energy system and South Africa's greenhouse gas emissions trajectory. The data and scripts to generate this study will be made available at https://github.com/tum-ewk/message_ix_south_africa following the publication of this manuscript. Our results indicate that shale gas extraction costs must be below 3 USD/GJ for this energy source to reach a significant share in the fuel mix; this is well below current cost estimates. If, however, low-cost shale gas is available, both coal and low-carbon sources are replaced by natural gas. Whether carbon dioxide emissions increase or decrease as a result depends on the stringency of the climate change mitigation policy in place: without carbon pricing, natural gas replaces coal and mitigates harmful emissions; under high carbon prices, power generation from coal is phased out in any case, and natural gas competes with zero-carbon renewables, leading to an increase of emissions compared to a no-shale scenario

Air quality and health implications of 1.5–2°C climate pathways under considerations of ageing population: A multi-model scenario analysis

Low-carbon pathways consistent with the 2°C and 1.5°C long-term climate goals defined in the Paris Agreement are likely to induce substantial co-benefits for air pollution and associated health impacts. In this analysis, using five global integrated assessment models, we quantify the emission reductions in key air pollutants resulting from the decarbonization of energy systems and the resulting changes in premature mortality attributed to the exposure to ambient concentrations of fine particulate matter. The emission reductions differ by sectors. Sulfur emissions are mainly reduced from power plants and industry, cuts in nitrogen oxides are dominated by the transport sector, and the largest abatement of primary fine particles is achieved in the residential sector. The analysis also shows that health benefits are the largest when policies addressing climate change mitigation and stringent air pollution controls are coordinated. We decompose the key factors that determine the extent of health co-benefits, focusing on Asia: changes in emissions, urbanization rates, population growth and ageing. Demographic processes, particularly due to ageing population, counteract in many regions the mortality reductions realized through lower emissions

Taking stock of national climate policies to evaluate implementation of the Paris Agreement

Many countries have implemented national climate policies to accomplish pledged Nationally Determined Contributions and to contribute to the temperature objectives of the Paris Agreement on climate change. In 2023, the global stocktake will assess the combined effort of countries. Here, based on a public policy database and a multi-model scenario analysis, we show that implementation of current policies leaves a median emission gap of 22.4 to 28.2 GtCO2eq by 2030 with the optimal pathways to implement the well below 2 °C and 1.5 °C Paris goals. If Nationally Determined Contributions would be fully implemented, this gap would be reduced by a third. Interestingly, the countries evaluated were found to not achieve their pledged contributions with implemented policies (implementation gap), or to have an ambition gap with optimal pathways towards well below 2 °C. This shows that all countries would need to accelerate the implementation of policies for renewable technologies, while efficiency improvements are especially important in emerging countries and fossil-fuel-dependent countries

Cost and attainability of meeting stringent climate targets without overshoot

Global emissions scenarios play a critical role in the assessment of strategies to mitigate climate change. The current scenarios, however, are criticized because they feature strategies with pronounced overshoot of the global temperature goal, requiring a long-term repair phase to draw temperatures down again through net-negative emissions. Some impacts might not be reversible. Hence, we explore a new set of net-zero CO2 emissions scenarios with limited overshoot. We show that upfront investments are needed in the near term for limiting temperature overshoot but that these would bring long-term economic gains. Our study further identifies alternative configurations of net-zero CO2 emissions systems and the roles of different sectors and regions for balancing sources and sinks. Even without net-negative emissions, CO2 removal is important for accelerating near-term reductions and for providing an anthropogenic sink that can offset the residual emissions in sectors that are hard to abate