Abstract
The most efficient way to coordinate various activities within a supply chain is to make use of markets. Markets can be defined as institutional solutions which enable economic agents to obtain inputs from other agents for their production or consumption activities or to supply their outputs to other agents. The more developed these energy markets are, the less economic agents need to realize the required inputs within their organization themselves. This chapter first discusses the various dimensions of markets (Sect. 3.2), before going into the main characteristics of the markets for coal, oil, gas, electricity and heat (Sect. 3.3). This chapter concludes by introducing the role of governments in organizing these markets, both as an active player in the supply chain and as regulator (Sect. 3.4).
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Notes
- 1.
In electricity markets, day-ahead and intraday markets are called spot markets, but in principle these markets are also forward markets. The real-time market in electricity markets is the balancing market (see Sect. 7.4).
- 2.
This period in the future may be shorter or longer away. It may refer to, for instance, the next day (‘day-ahead contract’), next month (‘month-ahead contract’), next quarter (‘quarter-ahead contract’) or next year (‘year-ahead contract’).
- 3.
In Sect. 4.2, we will explain the concept of the supply curve.
- 4.
The transport costs are about 5–10% of the end-user coal price paid by electricity producers (EIA 2019).
- 5.
- 6.
The EIA has calculated this change as the difference in the price of the oil futures contract 12 months ahead minus the price of the next month’s oil futures contract. If this difference is positive, the market expects that the oil price will increase, which is an incentive to store oil and sell it later at the higher price.
- 7.
In Europe only a few physical gas hubs exist, such as Baumgarten in Vienna.
- 8.
The transmission losses in the current electricity systems amount to about 5% of final consumption (see Table 3.5).
- 9.
- 10.
Regulation of an industry can be defined in various ways. Baldwin et al. (2012) distinguish (a) regulation as a set of rules, (b) regulation as all actions by the state to influence business or social behaviour and (c) regulation as all forms of influence (by state or market participants) on behaviour of agents. In this book, we follow the second definition.
- 11.
- 12.
Note that the relevant stakeholders do not only include the regulated firms, but also those economic agents that are directly affected by the regulatory decisions, such as the users of networks who have to pay the regulated tariffs.
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Mulder, M. (2021). Energy Markets and Energy Policies. In: Regulation of Energy Markets. Lecture Notes in Energy, vol 80. Springer, Cham. https://doi.org/10.1007/978-3-030-58319-4_3
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DOI: https://doi.org/10.1007/978-3-030-58319-4_3
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