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Network access and market power

Franz Hubert and Ekaterina Orlova

Energy Economics, 2018, vol. 76, issue C, 170-185

Abstract: We use cooperative game theory to study the impact of the liberalization of EU natural gas markets on the balance of power between ‘local champions', customers, and outside producers, such as Russian Gazprom. We calibrate a model of the Eurasian gas network and distinguish between two steps of the reform: first, the opening of access to transit pipes and second, the opening of access to distribution systems, hence customers. Using the Shapley Value as a power index, we find a modest and rather heterogeneous impact from the first step. The impact of the second step is much larger and yields a clear pattern: all local champions lose, while all customers and all outside players gain. As one third of the losses of champions within EU leaks to players abroad, current reforms might enhance the dominance of already powerful outside producers. When network power is assessed with the nucleolus, in contrast, full liberalization of access to customers does not benefit outside producers at all.

Keywords: Network access; Natural gas; Countervailing power; Shapley Value; Nucleolus (search for similar items in EconPapers)
JEL-codes: L5 L9 Q4 (search for similar items in EconPapers)
Date: 2018
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