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Russian Gas Imports in Europe: How Does Gazprom Reliability Change the Game?

Joris Morbee and Stef Proost

Year: 2010
Volume: Volume 31
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No4-4
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Abstract:
Europe�s dependence on Russian gas imports has been the subject of increasing political concern after gas conflicts between Russia and Ukraine in 2006 and 2009. This paper assesses the potential impact of Russian unreliability on the European gas market, and how it affects European gas import strategy. We also study to what extent Europe should invest in strategic gas storage capacity to mitigate the effects of possible Russian unreliability. The European gas import market is described by differentiated competition between Russia and a � more reliable � competitive fringe of other exporters. The results show that Russian contract volumes and prices decline significantly as a function of unreliability, so that not only Europe but also Russia suffers if Russia�s unreliability increases. For Europe, buying gas from more reliable suppliers at a price premium turns out to be generally more attractive than building strategic gas storage capacity.



Cross-Border Exchange and Sharing of Generation Reserve Capacity

Fridrik M. Baldursson, Ewa Lazarczyk, Marten Ovaere, and Stef Proost

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.fbal
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Abstract:
This paper develops a stylized model of cross-border balancing. We distinguish three degrees of cooperation: autarky, reserves exchange and reserves sharing. The model shows that TSO cooperation reduces costs. The gains of cooperation increase with cost asymmetry and decrease with correlation of real-time imbalances. Based on actual market data of reserves procurement of positive and negative automatic frequency restoration reserves in Belgium, France, Germany, the Netherlands, Portugal and Spain, we estimate the procurement cost decrease of exchange to be €165 million per year without transmission constraints and €135 million per year with transmission constraints. The cost decrease of sharing is estimated to be €500 million per year. The model also shows that voluntary cross-border cooperation could be hard to achieve, as TSOs do not necessarily have correct incentives.



Optimal Electricity Transmission Reliability: Going Beyond the N-1 Criterion

Marten Ovaere and Stef Proost

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.mova
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Abstract:
In the presence of transmission outages, uncertain demand and variable renewable supply, network operators keep a reliability margin to avoid interruptions and black-outs. The reliability margin is presently determined by the N-1 reliability criterion. Our analytical model defines the optimal reliability margin by balancing congestion costs and interruption costs. This leads to more efficient use of transmission capacity and to smaller investment needs than with the N-1 criterion. A numerical illustration shows the net benefits of the new reliability criterion.



Distortions of National Policies to Renewable Energy Cooperation Mechanisms

Jelle Meus, Hanne Pittomvils, Stef Proost, and Erik Delarue

Year: 2022
Volume: Volume 43
Number: Number 4
DOI: 10.5547/01956574.43.4.jmeu
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Abstract:
The EU endeavors to stimulate the use of renewable energy cooperation mechanisms. These cooperation mechanisms can significantly reduce the policy cost for meeting renewable targets. Several authors, however, have raised concerns that such cooperation mechanisms can be subject to efficiency losses due to different national regulatory conditions, and due to an ill-advised selection of cross-border support instruments. A quantitative evaluation of these effects remains missing. To address this gap, we first introduce a unifying analytical framework to show how optimal cross-border renewable energy trade should be organized and how these mechanisms could be distorted. We then develop a partial equilibrium model, formulated as a large-scale mathematical program with equilibrium constraints, to assess the impact of (i) different national grid cost allocation regimes and (ii) different cross-border feed-in premium implementations. Our results indicate that EU-wide auctions for renewable electricity should (i) not be based on sliding feed-in premiums and should (ii) ideally be discriminatory if national regulatory conditions differ across Member States. We also consider country-level distributional effects and confirm that Member States can lose when engaging in renewable cooperation.





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