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Fuel flexibility in the West European power sector

Identifieur interne : 005A08 ( Istex/Corpus ); précédent : 005A07; suivant : 005A09

Fuel flexibility in the West European power sector

Auteurs : Patrik Söderholm

Source :

RBID : ISTEX:B4A73E1D678BA5992C1514C5F7508114A6EBBA5C

English descriptors

Abstract

Abstract: This paper analyzes the role of fuel flexibility in the West European power generation sector. Fuel flexibility is recognized to have two important features. It improves the power sector's ability to respond to fuel supply interruptions, and it permits short-run price-induced interfuel competition. The security of supply issue is examined by assessing the ability of the West European power sector to respond to an interruption in gas imports. This ability is found to be high. Especially the use of oil in dual- and multi-fired plants provides a significant buffer against a potential gas supply cut. In an attempt to measure the degree of price-induced interfuel substitution in West European power generation two flexible cost functions are employed; the Translog and the Generalized Leontief. The cross-price elasticities of fossil fuel demand generated by these indicate notable short-run interfuel substitution in Western Europe, in particular between oil and gas. Since emerging competitive electricity and gas markets normally induce utilities to reduce fuel costs through improved fuel contracting, short-run interfuel substitution is likely to remain significant also in the future. This has important implications for European energy markets and policies.

Url:
DOI: 10.1016/S0301-4207(00)00025-8

Links to Exploration step

ISTEX:B4A73E1D678BA5992C1514C5F7508114A6EBBA5C

Le document en format XML

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<div type="abstract" xml:lang="en">Abstract: This paper analyzes the role of fuel flexibility in the West European power generation sector. Fuel flexibility is recognized to have two important features. It improves the power sector's ability to respond to fuel supply interruptions, and it permits short-run price-induced interfuel competition. The security of supply issue is examined by assessing the ability of the West European power sector to respond to an interruption in gas imports. This ability is found to be high. Especially the use of oil in dual- and multi-fired plants provides a significant buffer against a potential gas supply cut. In an attempt to measure the degree of price-induced interfuel substitution in West European power generation two flexible cost functions are employed; the Translog and the Generalized Leontief. The cross-price elasticities of fossil fuel demand generated by these indicate notable short-run interfuel substitution in Western Europe, in particular between oil and gas. Since emerging competitive electricity and gas markets normally induce utilities to reduce fuel costs through improved fuel contracting, short-run interfuel substitution is likely to remain significant also in the future. This has important implications for European energy markets and policies.</div>
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<note type="content">Table 1: Dual- and multi-fired electricity generating capacity in eight West European countries for selected years (GW)a</note>
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<note type="content">Table 3: Shares of dual- and multi-fired power capacity and corresponding cross-price fuel elasticities in Western Europe</note>
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