Networks and Spatial Economics

, Volume 12, Issue 3, pp 377–401 | Cite as

Combining Energy Networks

  • Jan Abrell
  • Hannes WeigtEmail author


Electricity markets depend on upstream energy markets to supply the fuels needed for generation. Since these markets rely on networks, congestion in one can quickly produce changes in another. In this paper we develop a combined partial equilibrium market model which includes the interactions of natural gas and electricity networks. We apply the model to a stylized representation of Europe’s electricity and natural gas markets to illustrate the upstream and downstream feedback effects which are not obvious on first sight. We find that both congestion and loop-flow effects in electricity markets impact prices and quantities in markets located far from the initial cause of the market changes.


Electricity network Natural gas network Europe MCP 



We thank Christian von Hirschhausen, Sophia Rüster, and participants of the YEEES meeting April 2010 in Cambridge, UK, and the editor and referees for their comments and suggestions.


  1. An S, Li Q, Gedra TW (2003) Natural gas and electricity optimal power flow. IEEE PES Transmission and Distribution Conference and Exposition, Dallas, Texas, Sept. 7–12Google Scholar
  2. Arnold M, Andersson G (2008) Decomposed electricity and natural gas optimal power flow. 16th PSCC, Glasgow, Scotland, July 14–18Google Scholar
  3. Aune FR, Golombek R, Kittelsen SAC, Rosendahl KE, Wolfgang O (2001) LIBEMOD—LIBEralisation MODel for the European Energy Markets: a technical description. Ragnar Frisch Centre for Economic Research, Working Paper 1/2001. Accessed 15.01.2010
  4. Bauer N et al (2008) REMIND: the equations. Potsdam Institute for Climate Impact Research (PIK). Accessed 15.01.2010
  5. Brooke A, Kendrick D, Meeraus A (2008) GAMS a user’s guide. GAMS Development Cooperation, WashingtonGoogle Scholar
  6. Capros P, Georgakopoulos P, Van Regemorter D, Proost S, Schmidt C (1997) The GEM-E3 general equilibrium of the European union. Economic and financial modeling. 21–160Google Scholar
  7. Egging R, Gabriel SA, Holz F, Zhuang J (2008) A complementarity model for the European natural gas market. Energy Policy 36(7):2385–2414CrossRefGoogle Scholar
  8. Eurostat (2010) Energy statistics—supply, transformation, Consumption. Accessed 15.01.2010
  9. Ferris MC, Munson TS (2000) Complementarity problems in GAMS and the path solver. J Econ Dyn Control 24(2):165–188CrossRefGoogle Scholar
  10. Gabriel SA, Zhuang J, Kiet S (2005) A large-scale linear complementarity model of the North American natural gas market. Energy Econ 27(4):639–665CrossRefGoogle Scholar
  11. Green R (2007) Nodal pricing of electricity: how much does it cost to get it wrong? J Regul Econ 31(2):125–149CrossRefGoogle Scholar
  12. Grübler A, Messner S (1998) Technological change and the timing of mitigation measures. Energy Econ 20(5–6):495–512CrossRefGoogle Scholar
  13. Hobbs BF (2001) Linear complementarity models of Nash–Cournot competition in Bilateral and POOLCO power markets. IEEE Trans Power Syst 16(2):194–202CrossRefGoogle Scholar
  14. Holz F (2009) Modeling the European natural gas market—static and dynamic perspectives of an oligopolistic market. Dissertation, TU BerlinGoogle Scholar
  15. IPCC (2006) 2006 IPCC guidelines for national greenhouse gas inventories. In: Eggleston HS, Buendia L, Miwa K, Ngara T, Tanabe K (eds). Institute for global environmental strategyGoogle Scholar
  16. Kouvaritakis N, Soria A, Isoard S (2000) Modelling energy technology dynamics: methodology for adaptive expectations models with learning by doing and learning by searching. Int J Global Energy Issues 14(1–2):104–115Google Scholar
  17. Leuthold F, Weigt H, von Hirschhausen C (2008) ELMOD—a model of the European electricity market. Dresden University of Technology Electricity Market Working Papers WP-EM-00Google Scholar
  18. Lochner S, Bothe D (2007) Nord stream-gas, quo vadis? Analyse der Ostseepipeline mit dem TIGER-Modell. Energiewirtsch Tagesfragen 57(11):18–23Google Scholar
  19. Loulou R, Goldstein G, Noble K et al (2004) Documentation for the MARKAL family of modelsGoogle Scholar
  20. Mathiesen L, Roland K, Thonstad K (1987) The European natural gas market: degrees of market power on the selling side. In: Golombek R, Hoel M, Vislie J (eds), Natural gas markets and contracts, contributions to economic analysis. North-Holland, 27–58Google Scholar
  21. Möst D, Perlwitz H (2009) Prospects of gas supply until 2020 in Europe and its relevance for the power sector in the context of emission trading. Energy 34(10):1510–1522CrossRefGoogle Scholar
  22. Neuhoff K, Barquin J, Boots MG, Ehrenmann A, Hobbs BF, Rijkers AM, Vásquez M (2005) Network-constrained cournot models of liberalized electricity markets: the devil is in the details. Energy Econ 27(3):495–525CrossRefGoogle Scholar
  23. Neumann A, Viehrig N, Weigt H (2009) InTraGas—a stylized model of the European natural gas network. Dresden University of Technology resource markets working paper WP-RM-16Google Scholar
  24. O’Neil RP, Sotkiewicz PM, Hobbs BF, Rothkopf MH, Stewart WR Jr (2005) Efficient market-clearing prices in markets with nonconvexities. Eur J Oper Res 164:296–285Google Scholar
  25. Paltsev S, Reilly JM, Jacoby HD, Eckaus RS, McFarland J, Sarofim M, Asadoorian M, Babiker M (2005) The MIT Emission Prediction and Policy Analysis (EPPA) model: version 4. MIT Joint program on the science and policy of global change report 125Google Scholar
  26. Perner J, Seeliger A (2004) Prospects of gas supplies to the European market until 2030—results from the simulation model EUGAS. Util Policy 12(4):291–302CrossRefGoogle Scholar
  27. Rüster S (2010) Recent dynamics in the global liquefied natural gas industry. Dresden university of technology resource markets working papers WP-RM-19Google Scholar
  28. Rutherford TF (1995) Extension of GAMS for complementarity problems arising in applied economic analysis. J Econ Dyn Control 19(8):1299–1324CrossRefGoogle Scholar
  29. Smeers Y (1997) Computable equilibrium models and the restructuring of the European electricity and gas markets. Energy J 18(4):1–31Google Scholar
  30. Stigler H, Todem C (2005) Optimization of the Austrian electricity sector (Control Zone of VERBUND APG) under the constraints of network capacities by nodal pricing. Cent Eur J Oper Res 13:105–125Google Scholar
  31. UCTE (2007) System adequacy forecast, SAF 2006–2015: scenarios. Accessed 15.01.2010
  32. Unsihuay C, Lima JWM, de Souza ACZ (2007) Modeling the integrated natural gas and electricity optimal power flow. IEEE Power Engineering Society General Meeting, Tampa, Florida, June 24–28Google Scholar
  33. Ventosa M, Baíllo Á, Ramos A, Rivier M (2005) Electricity market modeling trends. Energy Policy 33(7):897–913CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Dresden University of Technology, Faculty of Business and Economics, Chair of Energy Economics and Public Sector ManagementDresdenGermany

Personalised recommendations