How Strategic Behavior of Natural Gas Exporters Can Affect the Sectors of Electricity, Heating, and Emission Trading during the European Energy Transition

Sina Heidari

doi:10.3390/en13195040

Abstract

The European demand for natural gas imports may change through the energy transition, which may affect natural gas exporters’ strategic behavior and consequently the natural gas prices. Changes in natural gas prices in turn influence the European energy sector in terms of gas consumption in the short-term and investments in the long-term. The present paper develops a large-scale partial equilibrium market model formulated as a mixed complementarity model (MCP) with conjectural variations. This model considers the global natural gas market and the European markets of electricity, heating, and emission trading in one equilibrium. We apply this model to investigate the long-term impact of market power by gas exporters on the mentioned energy-related markets on the horizon of 2050. The results of the study show that a decrease in the market power by gas exporters decreases natural gas prices, leading to cheaper electricity and CO2 prices in the mid-term. However, a very tight emission cap in 2050 can result in the reverse phenomenon.

Highlights

Natural gas is considered to maintain its role in European energy consumption during the energy transition in the mid-term [1]
The present paper aims to investigate the interdependencies between the natural gas sector and the sectors of electricity, heating, and emission trading during the European energy transition
We develop a large-scale partial model based on the principles of Cournot–Nash equilibria, which includes the sectors of natural gas, electricity and heating as well as emission trading

Summary

Introduction

Natural gas is considered to maintain its role in European energy consumption during the energy transition in the mid-term [1]. Changes in the natural gas sector can affect gas-consuming sectors and vice versa. European carbon abetment policies aim to shift energy consumption and investments towards renewables and less carbon-intense fuels such as natural gas. This shift may affect the European gas demand and affect the natural gas prices. An increase in natural gas prices may affect gas-consuming sectors in terms of gas consumption in the short-term and investment patterns in the long-term. Studying the interdependencies between the natural gas sector and gas consumer sectors (e.g., power sector) is of great interest

Methods

Results

Conclusion