Market equilibrium models of natural gas markets in North America and Europe
Sponsors: National Science Foundation (DMS, Award #0106880), Humboldt Foundation,
Alexander von Humboldt Foundation, TransCoop Program
Research Team (UMD): Steven A. Gabriel (PI-NSF, Co-PI Humboldt), Jifang Zhuang, Ruud Egging, Supat Kiet
Research Team (DIW & TU-Dresden): Christian von Hirschhausen (co-PI, Humboldt), Franziska Holz, Sophia Rüster
Dr. Steven A. Gabriel and several of his graduate students (Jifang Zhuang, Ph.D. CEE 2005; Supat Kiet, Ph.D. Candidate CEE; Ruud Egging, Doctoral Student CEE) as well as collaborators (Franziska Holz, Ph.D. Candidate TU Dresden, Germany) have developed market equilibrium models of natural gas markets in North America and Europe. These models are based on a Nash-Cournot game theory concept in which market players such as gas producers, traders, or pipelines are individually modeled as solving certain profit maximization optimization problems. In combination with colleages from DIW (German Institute for Economic Research) and Technische Universität, Dresden, they are expanding this to a World Gas Model (WGM).
Collecting all the optimality conditions for these problems together along with market-clearing conditions, results in a nonlinear complementarity or equilibrium problem. These models have been presented at several international conferences and the work has been supported by two separate grants from the National Science Foundation totaling $512,632. Dr. Gabriel has been the sole PI on both these projects. These models permit regulators, other government agencies and private sector energy companies to see the influence of market power by strategic players in these markets on raising prices as well as determine bottlenecks in the pipeline and other distribution systems such as marine-transported liquefied natural gas.
Selected Recent Papers
- S. A. Gabriel, S. Kiet, J. Zhuang. 2005. "A Mixed Complementarity-Based Equilibrium Model of Natural Gas Markets", Operations Research, 53(5), 799-818.
- S. A. Gabriel, J. Zhuang, S. Kiet. 2005. "A Large-Scale Complementarity Model of the North American Natural Gas Market", Energy Economics, 27, 639-665.
- R. Egging, S. A. Gabriel, "Examining Market Power in the European Natural Gas Market", 2006. Energy Policy, 34 (17), 2762-2778.
- J. Zhuang, S.A. Gabriel, 2008, "A Complementarity Model for Solving Stochastic Natural Gas Market Equilibria,"Energy Economics 30(1), 113-147.
- S. A. Gabriel and Y. Smeers, 2006. "Complemenatarity Problems in Restructured Natural Gas Markets," Recent Advances in Optimization. Lecture Notes in Economics and Mathematical Systems, Edited by A. Seeger,Vol. 563, Springer-Verlag Berlin Heidelberg, 343-373.
- R. Egging, S.A. Gabriel, F.Holz, J. Zhuang, "A Complementarity Model for the European Natural Gas Market," Energy Policy, January, 2008, accepted.
- R. Egging, F. Holz, C. von Hirschhausen, S.A. Gabriel, " Representing GASPEC with the World Gas Model," July 2008, in review.
Selected Recent Presentations
- Complementarity Models for Natural Gas Market Equilibria with Endogenous Risk (invited talk with J. Zhuang), 29th IAEE International Conference, Potsdam, Germany, June 7-10, 2006.
- A Complementarity Model for the European Natural Gas Market with Worldwide LNG Representation (invited talk with R. Egging (presenter), F. Holz, J. Zhuang), Energy Modeling Forum Meeting, Stanford , California , January 25-26, 2007.
- Complementarity-Based Energy Equilibrium Models and a Scenario Reduction Algorithm (with J. Zhuang, S. Kiet ,and R. Egging), invited talk, National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan, March 22, 2007.
- A Complementarity Model for the European Natural Gas Market with Worldwide LNG Representation (with R. Egging, F. Holz, J. Zhuang), invited talk, U.S. Department of Energy, Washington, DC, USA, May 22, 2007.
- Stochasticity in Infrastructure Network Models: Application to Global Natural Gas Markets (invited talk with J. Zhuang and R. Egging), Technische Universität-Berlin, Berlin, Germany, June 28, 2007.
- A Complementarity Model for the EU Natural Gas Market (invited talk with J. Zhuang, S. Kiet, and R. Egging), 22nd European Conference on Operational Research, Prague, Czech Republic, July 8-11, 2007.