Endre Bjørndal

Productivity Change and Innovation in Norwegian Electricity Distribution Companies

Regulators of electricity distribution networks have typically applied Data Envelopment Analysis (DEA) to cross-section data for benchmarking purposes. However, the use of panel data to analyse the impact of regulatory policies on productivity change over time is less frequent. The main purpose of this paper is to construct a Malmquist productivity index to examine the recent productivity change experienced by Norwegian distribution companies between 2004 and 2007. The Malmquist index is decomposed in order to explore the sources of productivity change, and to identify the innovator companies that pushed the frontier forward each year. The input and output variables considered are those used by the Norwegian regulator. In order to reflect appropriately the exogenous conditions where the companies operate, the efficiency model used in this paper incorporates geography variables as outputs of the DEA model. Unlike the model used by the regulator, we included virtual weight restrictions in the DEA formulation to correct the biases in the DEA results that may be associated to a judicious choice of weights by some of the companies.

Energy, Natural Resources and Environmental Economics

Petroleum and Natural Gas.- Investment Strategy of Sovereign Wealth Funds.- Chasing Reserves: Incentives and Ownership.- Elastic Oil: A Primer on the Economics of Exploration and Production.- Applied Mathematical Programming in Norwegian Petroleum Field and Pipeline Development: Some Highlights from the Last 30 Years.- Analysis of Natural Gas Value Chains.- On Modeling the European Market for Natural Gas.- Equilibrium Models and Managerial Team Learning.- Refinery Planning and Scheduling: An Overview.- Electricity Markets and Regulation.- Multivariate Modelling and Prediction of Hourly One-Day Ahead Prices at Nordpool.- Time Regularities in the Nordic Power Market: Potentials for Profitable Investments and Trading Strategies?.- Valuation and Risk Management in the Norwegian Electricity Market.- Stochastic Programming Models for Short-Term Power Generation Scheduling and Bidding.- Optimization of Fuel Contract Management and Maintenance Scheduling for Thermal Plants in Hydro-based Power Systems.- Energy Portfolio Optimization for Electric Utilities: Case Study for Germany.- Investment in Combined Heat and Power: CHP.- Capacity Charges: A Price Adjustment Process for Managing Congestion in Electricity Transmission Networks.- Harmonizing the Nordic Regulation of Electricity Distribution.- Benchmarking in Regulation of Electricity Networks in Norway: An Overview.- On Depreciation and Return on the Asset Base in a Regulated Company Under the Rate-of-Return and LRIC Regulatory Models.- Natural Resources and Logistics.- Rescuing the Prey by Harvesting the Predator: Is It Possible?.- Absorptive Capacity and Social Capital: Innovation and Environmental Regulation.- Issues in Collaborative Logistics.- Pilot Assignment to Ships in the Sea of Bothnia.- Transportation Planning and Inventory Management in the LNG Supply Chain.- General Problems and Methods.- Optimal Relinquishment According to the Norwegian Petroleum Law: A Combinatorial Optimization Approach.- An Overview of Models and Solution Methods for Pooling Problems.- Cooperation Under Ambiguity.- The Perpetual American Put Option for Jump-Diffusions.- Discrete Event Simulation in the Study of Energy, Natural Resources and the Environment.

Cost Allocation in a Bank ATM Network

Abstract.We consider a situation in which a group of banks consider connecting their Automated Teller Machines (ATMs) in a network, so that the banks’ customers may use ATMs of any bank in the network. The problem studied is that of allocating the total transaction costs arising in the network, among the participating banks. The situation is modeled as a cooperative game with transferable utility. We propose two allocations, and discuss their relation to the core and other well-known solution concepts, as well as to population monotonicity.

Benchmarking in Regulation of Electricity Networks in Norway: An Overview

In this paper, we give an overview of the Norwegian regulation of electricity networks after the Energy Act of 1990 and the deregulation of the electricity markets in 1991. We concentrate on the regulatory oversight of distribution network companies and regional transmission. Our main focus is on the benchmarking models, including the application of their results, in the three periods of incentive regulation that we have seen so far, after its introduction in 1997. We examine the various data envelopment analysis (DEA) models that have been used, and we describe specific issues driving their development and how the results have been used.

Weighted Allocation Rules for Standard Fixed Tree Games

Abstract.In this paper we consider standard fixed tree games, for which each vertex unequal to the root is inhabited by exactly one player. We present two weighted allocation rules, the weighted down-home allocation and the weighted neighbour-home allocation, both inspired by the painting story in Maschler et al. (1995) . We show, in a constructive way, that the core equals both the set of weighted down-home allocations and the set of weighted neighbour allocations. Since every weighted down-home allocation specifies a weighted Shapley value (Kalai and Samet (1988)) in a natural way, and vice versa, our results provide an alternative proof of the fact that the core of a standard fixed tree game equals the set of weighted Shapley values. The class of weighted neighbour allocations is a generalization of the nucleolus, in the sense that the latter is in this class as the special member where players have all equal weights.

Congestion management by dispatch or re-dispatch: Flexibility costs and market power effects

Several European electricity spot markets use simplified methods such as uniform or zonal pricing. These methods only partly address congestion. Re-dispatch is then necessary to achieve a feasible flow. In the assessment of congestion methods we address congestion methods in both spot and re-dispatch markets. The paper first shows that simplified methods (e.g. uniform pricing) combined with re-dispatch, in theory can achieve the maximum optimal surplus of the nodal pricing method. This however only occurs under the assumptions of full participation in re-dispatch and no extra costs of readjustment. We show that violations of these assumptions, i.e. limited participation and extra costs of readjustment can make the spot and re-dispatch model of handling congestion inefficient compared to nodal pricing. Further, we show that when a strategic player operates in the spot and re-dispatch market model, the consequences of market power potentially may be more severe and difficult to detect.

Flow sharing and bankruptcy games

We discuss the relationship between bankruptcy problems and flow sharing problems, respectively, and show that the latter type of problem can be interpreted as a generalization of the former. The corresponding flow sharing game is convex, hence we can use the converse reduced game property to characterize the nucleolus and the constrained egalitarian solution. Our main contribution is thus to introduce the nucleolus as an alternative solution concept for flow sharing problems, and to offer a game-theoretic interpretation of the traditional egalitarian solution.

Nodal pricing in a coupled electricity market

This paper investigates a pricing model for an electricity market with a hybrid congestion management method, i.e. part of the system applies a nodal pricing scheme and the rest applies a zonal pricing scheme. The model clears the zonal and nodal pricing areas simultaneously. The nodal pricing area is affected by the changes in the zonal pricing area since it is directly connected to the zonal pricing area by commercial trading. The model is tested on a 13-node power system. Within the area that is applying nodal pricing, prices and surpluses given by the hybrid pricing model match well with those given by the full nodal pricing model. Part of the network is better utilized compared to the solutions given by the full zonal pricing model. However, the prices given by the hybrid system may send wrong economic signals which triggers unnecessary generation from existing capacities, exacerbates grid congestion, and induces higher re-dispatching costs.

Pricing Wind: A Revenue Adequate, Cost Recovering Uniform Price for Electricity Markets with Intermittent Generation

With greater penetration of renewable generation, the uncertainty faced in electricity markets has increased substantially. Conventionally, generators are assigned a pre-dispatch quantity in advance of real time, based on estimates of uncertain quantities. Expensive real time adjustments then need to be made to ensure demand is met, as uncertainty takes on a realization. We propose a new stochastic-programming market clearing mechanism to optimize pre-dispatch quantities, given the uncertainties’ probability distribution and the costs of real-time deviation. This model differs from similar mechanisms previously proposed in that pre-dispatch quantities are not subject to any network or other physical constraints; nor do they play a role in financial settlement. We establish revenue adequacy in each scenario (as opposed to “in expectation”), welfare enhancement and expected cost recovery (including deviation costs), for this market clearing mechanism. We also establish that this market clearing mechanism is social welfare optimizing.

A Nodal Pricing Model for the Nordic Electricity Market

In the Nordic day-ahead electricity market zonal pricing or market splitting is used for relieving congestion between a predetermined set of bidding areas. This congestion management method represents an aggregation of individual connection points into bidding areas, and flows from the actual electricity network are only partly represented in the market clearing. Because of several strained situations in the power system during 2009 and 2010, changes in the congestion management method have been considered by the Norwegian regulator. In this paper we discuss nodal pricing in the Nordic power market, and compare it to optimal and simplified zonal pricing, the latter being used in today’s market. A model of the Nordic electricity market is presented together with a discussion of the calibration of actual market data for four hourly case studies with different load and import/exports to the Nordic area. The market clearing optimization model incorporates thermal and security flow constraints. We analyze the effects on prices and grid constraints and quantify the benefits and inefficiencies of the different methods. We find that the price changes with nodal pricing may not be dramatic, although in cases where intra-zonal constraints are badly represented by the aggregate transfer capacities in the simplified zonal model the nodal prices may be considerably higher on average and vary more than the simplified zonal prices. On the other hand nodal prices may vary less than the simplified zonal prices if aggregate transfer capacities are set too tightly. Allowing for more prices in the Nordic power market would make dealing with capacity limits easier and more transparent.