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Endogenous Structural Change and Climate Targets Modeling Experiments with Imaclim-R

Renaud Crassous, Jean-Charles Hourcade, Olivier Sassi

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-13
View Abstract

Abstract:
This paper envisages endogenous technical change that results from the interplay between the economic growth engine, consumption, technology and localization patterns. We perform numerical simulations with the recursive dynamic general equilibrium model Imaclim-R to study how modeling induced technical change affects costs of CO2 stabilization. Imaclim-R incorporates innovative specifications about final consumption of transportation and energy to represent critical stylized facts such as rebound effects and demand induction by infrastructures and equipments. Doing so brings to light how induced technical change may not only lower stabilization costs thanks to pure technological progress, but also trigger induction of final demand�effects critical to both the level of the carbon tax and the costs of policy given a specific stabilization target. Finally, we study the sensitivity of total stabilization costs to various parameters including both technical assumptions as accelerated turnover of equipments and non-energy choices as alternative infrastructure policies.



Simulating Security of Supply Effects of the Nabucco and South Stream Projects for the European Natural Gas Market

Caroline Dieckhoner

Year: 2012
Volume: Volume 33
Number: Number 3
DOI: 10.5547/01956574.33.3.6
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Abstract:
Because of the decrease in domestic production in Europe, additional natural gas volumes will be required. In addition to Nord Stream, the major import pipeline projects, Nabucco and South Stream, have been announced to provide further gas supplies to Europe. This raises the question concerning whether and how these projects contribute to the European Union's focus on security of supply. Applying the natural gas infrastructure model TIGER, this paper investigates the impact of these pipeline projects on southeastern Europe's gas supply. Gas flows and marginal cost prices are evaluated in general and considering the possibility of supply disruptions via Ukraine for the year 2020. The model results show a positive impact of these pipelines on security of supply despite few consumer cut-offs that result from intra-European bottlenecks. South Stream is only highly utilized in case of a Ukraine crisis, supporting the idea that its main purpose is to bypass Ukraine. Keywords: Natural gas, security of supply, Nabucco, South Stream, linear-optimization, transport infrastructure



Economic Growth and Infrastructure Investments in Energy and Transportation: A Causality Interpretation of China’s Western Development Strategy

Alice Shiu, Raymond Li, and Chi-Keung Woo

Year: 2016
Volume: Volume 37
Number: China Special Issue
DOI: 10.5547/01956574.37.SI1.ashi
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Abstract:
Were the large investments in energy and transportation infrastructure effective in fostering economic growth? Or did economic growth trigger these infrastructure developments? To answer these questions, we develop a simple model of production capacity constraints and use China's Western Development Strategy (WDS) as an example to investigate how the relationships among energy investment, transportation infrastructure expansion and economic growth differ in the pre-and post-WDS periods. Our Granger causality analysis uses a panel data sample for China's 30 provinces in the Western and non-Western regions for the period of 1991-2012. We find Granger causality only in the post-WDS period from transportation infrastructure expansion to economic growth and from economic growth to energy investment. These results suggest energy and transportation capacity constraints in the post-WDS period but not the pre-WDS period. Their policy implication is that China should continue its energy and transportation infrastructure investments with improved coordination.



Stochastic Modeling of Natural Gas Infrastructure Development in Europe under Demand Uncertainty

Marte Fodstad, Ruud Egging, Kjetil Midthun, and Asgeir Tomasgard

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.mfod
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Abstract:
We present an analysis of the optimal development of natural gas infrastructure in Europe based on the scenario studies of Holz and von Hirschhausen (2013). We use a stochastic mixed integer quadratic model to analyze the impact of uncertainty about future natural gas consumption in Europe on optimal investments in pipelines. Our data is based on results from the PRIMES model of natural gas demand and technology scenarios discussed in Knopf et al. (2013). We present a comparison between the results from the stochastic model and the expected value model, as well as an analysis of the individual scenarios. We also performed sensitivity analyses on the probabilities of the future scenarios. Comparison of the results from the stochastic model to those of a deterministic expected value model reveals a negligible Value of the Stochastic Solution. We do, however, find structurally different infrastructure solutions in the stochastic and the deterministic models. Regarding infrastructure expansions, we find that 1) the largest pipeline investments will be towards Asia, 2) there is a trend towards a larger gas supply from Africa to Europe, and 3) within Europe, eastward connections will be strengthened. Our main finding using the stochastic approach is that there is limited option value in delaying investments in natural gas infrastructure, until more information is available regarding policy and technology in 2020, due to the low costs of overcapacity.



The Role of Natural Gas in a Low-Carbon Europe: Infrastructure and Supply Security

Franziska Holz, Philipp M. Richter, and Ruud Egging

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.fhol
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Abstract:
In this paper, we analyse infrastructure needs of the European natural gas market in response to decarbonisation of the European energy system. To this end, we use numerical modelling and apply the Global Gas Model. We investigate three pathways of future natural gas consumption: i) a decreasing natural gas consumption, following the scenarios of the EU Energy Roadmap 2050; ii) a moderate increase of natural gas consumption, along the lines of the IEA's New Policies Scenario; and iii) a temporary increase of natural gas use as a "bridge" technology, followed by a strong decrease after 2030. Our results show that current import infrastructure and intra-European transit capacity are sufficient to accommodate future import needs in all scenarios. This is despite a pronounced reduction of domestic production and a strong increase in import dependency. However, due to strong demand in Asia, Europe must increasingly rely on exports from Africa and the Caspian region, leading to new infrastructure capacity from these regions. When natural gas serves as a "bridge" technology, short-term utilisation rates of LNG import capacity temporarily increase instead of instigating large scale pipeline expansions.



A Top-Down Approach to Evaluating Cross-Border Natural Gas Infrastructure Projects in Europe

András Kiss, Adrienn Selei, and Borbála Takácsné Tóth

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.akis
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Abstract:
There is an ongoing policy debate in Europe about how to select natural gas infrastructure projects for an EU-wide investment support scheme. We contribute to this debate by introducing a model-based project evaluation method that addresses several shortcomings of the current approach and demonstrate its application on a set of shortlisted investment proposals in Central and South Eastern Europe. Importantly, our selection mechanism deals with the complementarity and the substitutability of new pipelines. We find that a small number of projects are sufficient to maximize the net gain in regional welfare, but different baseline assumptions favor different project combinations. We also explore the consequences of Russian gas permanently delivered at the EU border from northern and southern routes that bypass Ukraine and find modest negative welfare effects.



European Scenarios of CO2 Infrastructure Investment until 2050

Pao-Yu Oei and Roman Mendelevitch

Year: 2016
Volume: Volume 37
Number: Sustainable Infrastructure Development and Cross-Border Coordination
DOI: https://doi.org/10.5547/01956574.37.SI3.poei
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Abstract:
Based on a review of the current state of the Carbon Capture, Transport and Storage (CCTS) technology, this paper analyzes the layout and costs of a potential CO2 infrastructure in Europe at the horizon of 2050. We apply the mixed-integer model CCTS-Mod to compute a CCTS infrastructure network for Europe, examining the effects of different CO2 price paths with different regional foci. Scenarios assuming low CO2 certificate prices lead to hardly any CCTS development in Europe. The iron and steel sector starts deployment once the CO2 certificate prices exceed 50 €/tCO2. The cement sector starts investing at a threshold of 75 €/tCO2, followed by the electricity sector when prices exceed 100 €/tCO2. The degree of CCTS deployment is found to be more sensitive to variable costs of CO2 capture than to investment costs. Additional revenues generated from utilizing CO2 for enhanced oil recovery (CO2-EOR) in the North Sea would lead to an earlier adoption of CCTS, independent of the CO2 certificate price; this case may become especially relevant for the UK, Norway and the Netherlands. However, scattered CCTS deployment increases unit cost of transport and storage infrastructure by 30% or more.



The Impact of Regulation on a Firm's Incentives to Invest in Emergent Smart Grid Technologies

Paulo Moisés Costa, Nuno Bento and Vítor Marques

Year: 2017
Volume: Volume 38
Number: Number 2
DOI: 10.5547/01956574.38.2.pcos
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Abstract:
This paper analyzes the implementation of new technologies in network industries through the development of a suitable regulatory scheme. The analysis focuses on Smart Grid (SG) technologies which, among others benefits, could save operational costs and reduce the need for further conventional investments in the grid. In spite of the benefits that may result from their implementation, the adoption of SGs by network operators can be hampered by the uncertainties surrounding actual performances. A decision model has been developed to assess the firms' incentives to invest in "smart" technologies under different regulatory schemes. The model also enables testing the impact of uncertainties on the reduction of operational costs, and of conventional investments. Under certain circumstances, it may be justified to support the development and early deployment of emerging innovations that have a high potential to ameliorate the efficiency of the electricity system, but whose adoption faces many uncertainties.



Geospatial, Temporal and Economic Analysis of Alternative Fuel Infrastructure: The case of freight and U.S. natural gas markets

Yueyue Fan, Allen Lee, Nathan Parker, Daniel Scheitrum, Rosa Dominguez-Faus, Amy Myers Jaffe, and Kenneth Medlock III

Year: 2017
Volume: Volume 38
Number: Number 6
DOI: 10.5547/01956574.38.6.yfan
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Abstract:
The transition to low-carbon fuel in the United States has spatial, temporal and economic aspects. Much of the economic literature on this topic has focused on aspects of the cost effectiveness of competing fuels. We expand this literature by simultaneously considering spatial, temporal and economic aspects in an optimization framework that integrates geographic information system (GIS) tools, network analysis, technology choice pathways and a vehicle demand choice model. We focus on natural gas fuel as a low-carbon alternative to oil-based diesel fuel in the heavy-duty sector primarily because of the recent cost benefits relative to diesel fuel and the high vehicle turnover rate in heavy-duty trucks. We find that the level of profitability of natural gas fueling infrastructure depends more on volume of traffic flows rather than proximity to natural gas supply.



Determining Optimal Interconnection Capacity on the Basis of Hourly Demand And Supply Functions of Electricity

Jan Horst Keppler and William Meunier

Year: 2018
Volume: Volume 39
Number: Number 3
DOI: 10.5547/01956574.39.3.jkep
View Abstract

Abstract:
Interconnections for cross-border electricity trade improve price convergence and welfare. Increased production from variable renewables however implies higher levels of optimal interconnection capacity than in the past. Rather than using scenario building to determine new optimal levels of interconnection capacity, this paper presents a new methodology for Cost-Benefit Analysis (CBA) based on empirical market data, using the French-German electricity trade as an example. Employing a very fine dataset of hourly supply and demand curves (aggregated auction curves) from the EPEX Spot market, it constructs net export (NEC) and net import demand curves (NIDC) for both countries. This allows assessing hourly welfare impacts for incremental capacity and, summed over the year, the annual welfare benefits for each discrete increase in interconnection capacity. Confronting benefits with the annualised costs of increasing interconnection capacity determines the socially optimal increase in interconnection capacity between France and Germany on the basis of empirical market micro-data.




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