Essays on the Economics of Energy Systems and Markets

This thesis presents four essays on the economics of energy systems and markets. The first essay investigates the effects of multipliers when pricing short-term gas transmission capacities, as is the case in the European Union’s (EU) gas transmission system. Using a stylised theoretical framework, the analysis shows that higher multipliers can result in increased storage utilisation and more uniform usage of transport capacities and can cause regional price spreads to rise. Higher multipliers are also found to result in increased total system costs and lower total welfare. Nevertheless, it is shown that there can exist optimal multiplier levels depending on the relative tariff levels that allow consumer surplus to be maximised via tariff reduction. The second essay builds upon the theoretical findings of the first essay and analyses the internal and external effects of multipliers in the EU in a more realistic setting. Using a numerical simulation model depicting the gas dispatch in the EU, the analysis identifies significant internal effects of multipliers in the regions. Multipliers in a region can also cause external effects in other regions, depending on where the regions are located along the gas transport chain. Because of those external effects, individually optimal (consumer-surplus-maximising) multipliers are found to not lead to a joint optimum. The third essay analyses the development of the market structure in the global crude oil market over the period 2013-2017. The analysis finds that the oligopolistic market structure assumptions are not able to explain the low prices observed during 2015 and 2016, which lie close to simulated perfectly competitive levels. This indicates that the market structure has evolved in a more competitive direction after the 2014 price decline. The OPEC+ production cuts observed in 2017 are also found to not have been effective at reclaiming market power. The fourth essay analyses the optimal (profit-maximising) dispatch of a coal-fired power plant with integrated thermal energy storage (TES). The TES system allows the plant to conduct energy arbitrage on day-ahead and intraday wholesale electricity markets, while also providing it with increased control power on the primary and secondary control power markets. Depicting a coal-fired plant located in Germany for the year 2019, the analysis finds that a TES system with 0.5 hours of storage capacity can increase the total profits of the plant by 2.4%