Kasimir Egli Analysis of Strategic Behaviour in Combined Electricity and Gas Markets Using Agent-based Computational Economics

In many European countries, natural gas-fired power plants are considered a possibility to quickly compensate the expected shortfall in electric energy supply. Increasing gasfired generation capacity would also increase the couplings and interactions between gas and electricity systems. So far, gas power plants participate in two different markets gas and electricity. Coupling these markets by establishing a single integrated gas-electricity market clearing could result in better overall market performance. This thesis proposes two integrated natural gas and electricity market models and outlines some of their basic characteristics. Specific emphasis is put on the issue of market power, wich is investigated by using agent-based computational economics. Two different models for integrated gas and electricity markets are compared. In the first model, gas-fired power plants submit two separate bids an offer bid for the electricity market and a demand bid for the gas market. The plants, which are modelled as learning agents, can vary the intercept of their marginal cost functions when bidding electricity. On the other hand, they can also change their demand function for gas. In the second model, power producers submit only one aggregated bid for their gas-electric conversion capacity, and the agents can vary the intercept of their marginal cost of converting gas into electricity. Further a third model with separated electricity and gas market clearings is introduced to compare separated with combined electricity and natural gas markets. The simulation results show the basic differences between the two market models. Besides overall social welfare, the differences in strategic behaviour and market power are significant. When comparing the two integrated models between each other, the second model with only one aggregated bid for the gas-electric conversion capacity gives less potential for strategic behaviour to gas power plant operators. The difference between the separated model and the combined model where gas-fired power plant operators offer electricity and demand gas is small.