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Investment vs. Refurbishment: Examining Capacity Payment Mechanisms Using Stochastic Mixed Complementarity Problems

Muireann A. Lynch and Mel T. Devine

Year: 2017
Volume: Volume 38
Number: Number 2
DOI: 10.5547/01956574.38.2.mlyn
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Abstract:
Capacity remuneration mechanisms exist in many electricity markets. Capacity mechanism designs do not explicitly consider the effects of refurbishment of existing generation units in order to increase their reliability. This paper presents a stochastic mixed complementarity problem to examine the impact of refurbishment on electricity prices and generation investment. Capacity payments are found to increase reliability when refurbishment is not possible, while capacity payments and reliability options yield similar results when refurbishment is possible. Final costs to consumers are similar under the two mechanisms with the exception of the initial case of overcapacity.



Natural Gas Transits and Market Power: The Case of Turkey

Simon Schulte and Florian Weiser

Year: 2019
Volume: Volume 40
Number: Number 2
DOI: 10.5547/01956574.40.2.ssch
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Abstract:
Turkey is a key country in order to realize the Southern Gas Corridor (SGC) due to its geographical location. However, as the main transit country within the SGC, Turkey could potentially exert market power with gas transits. Whether Turkey exerts market power or not, is crucial for an economic assessment of the SGC. Hence, the article investigates this issue quantitatively using a global partial equilibrium gas market model. An oligopolistic and a competitive supply structure in the European upstream market in 2030 are considered in the model based on calibrations to historical gas market situations. If the European gas market in 2030 is characterized by an oligopolistic supply, Turkey is able to exert market power resulting in higher prices compared to competitive transits, in particular in South Eastern Europe. In a competitive market structure, however, the importance of the SGC and thus the potential of Turkish transit market power is limited.



North American Natural Gas Markets Under LNG Demand Growth and Infrastructure Restrictions

Baturay Çalci, Benjamin D. Leibowicz, and Jonathan F. Bard

Year: 2022
Volume: Volume 43
Number: Number 2
DOI: 10.5547/01956574.43.2.bcal
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Abstract:
Strong liquefied natural gas (LNG) demand growth, especially in Asia, could increasingly motivate gas infrastructure development in North America. Nevertheless, opposition to new gas infrastructure is formidable in some of the U.S. states and Canadian provinces that are well positioned to supply LNG to the Asian market. In this paper, we investigate the combined effects of LNG demand growth and export infrastructure restrictions on North American natural gas markets through 2050. To do so, we build a mixed complementarity model with endogenous capacity investments. It is parameterized using publicly available data sources. Our results show that even if new export terminals cannot be constructed on the West Coast, LNG exports largely shift to other regions rather than suffer an overall decline. Increasing external demand for LNG puts upward pressure on regional prices in North America, and directs production and pipeline flows toward the regions that export LNG.





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