Table Of ContentEnergy Systems
SeriesEditor:
PanosM.Pardalos,UniversityofFlorida,USA
Forfurthervolumes:
http://www.springer.com/series/8368
Endre Bjørndal (cid:2) Mette Bjørndal
Panos M. Pardalos (cid:2) Mikael Ro¨nnqvist
Editors
Energy, Natural Resources
and Environmental
Economics
123
Editors
ProfessorEndreBjørndal ProfessorPanosM.Pardalos
DepartmentofAccounting,Auditing DepartmentofIndustrial&Systems
andLaw Engineering
NorwegianSchoolofEconomics CenterforApplied
andBusinessAdministration(NHH) Optimization,UniversityofFlorida
Helleveien30 WeilHall303
5045Bergen P.O.Box116595Gainesville
Norway FL32611-6595
[email protected] USA
Pardalos@ufl.edu
ProfessorMetteBjørndal ProfessorMikaelRo¨nnqvist
DepartmentofFinance DepartmentofFinance
andManagementScience andManagementScience
NorwegianSchoolofEconomics NorwegianSchoolofEconomics
andBusinessAdministration(NHH) andBusinessAdministration(NHH)
Helleveien30 Helleveien30
5045Bergen 5045Bergen
Norway Norway
[email protected] [email protected]
ISSN1867-8998 e-ISSN1867-9005
ISBN978-3-642-12066-4 e-ISBN978-3-642-12067-1
DOI10.1007/978-3-642-12067-1
SpringerHeidelbergDordrechtLondonNewYork
LibraryofCongressControlNumber:2010931834
(cid:3)c Springer-VerlagBerlinHeidelberg2010
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Preface
Thisbookconsistsofacollectionofarticlesdescribingtheemergingandintegrated
areaofEnergy,NaturalResourcesandEnvironmentalEconomics.Amajorityofthe
authorsareresearchersdoingappliedworkineconomics,finance,andmanagement
scienceandarebasedintheNordiccountries.Thesecountrieshavealongtradition
of managingnaturalresources.Manyof theapplicationsare thereforefoundedon
suchexamples.
ThebookcontentsarebasedonaworkshopthattookplaceduringMay15–16,
2008in Bergen,Norway.The aim of the workshopwas to create a meeting place
for researchers who are active in the area of Energy,Natural Resource, and Envi-
ronmentalEconomics,andatthesametimecelebrateProfessorKurtJo¨rnsten’s60th
birthday.
Thebookisdividedintofourparts.Thefirstpartconsiderspetroleumandnatural
gas applications, taking up topics ranging from the management of incomes and
reserves to market modeling and value chain optimization. The second and most
extensive part studies applications from electricity markets, including analyses of
marketprices,riskmanagement,variousoptimizationproblems,electricitymarket
design, and regulation. The third part describes different applications in logistics
andmanagementofnaturalresources.Finally,thefourthpartcoversmoregeneral
problemsandmethodsarisingwithinthearea.
Thecompiledsetof29papersattemptstoprovidereaderswithsignificantcon-
tributionsineachoftheareas.Thearticlesareoftwotypes,thefirstbeinggeneral
overviewsofspecificcentralsubjectareas,andthesecondbeingmoreorientedto-
wardsapplied research.Thishopefullymakesthe bookinteresting forresearchers
already active in research related to energy, natural resources, and environmental
economics,aswellasgraduatestudents.
WeacknowledgethevaluablecontributionsfromtheNorwegianSchoolofEco-
nomics and Business Administration (NHH) and the Institute for Research in
EconomicsandBusinessAdministration(SNF).Wearealsoverygratefultoallthe
refereesandtoPh.D.studentVictoriaGribkovskaiaforherworkonthemanuscript.
Bergen/Gainesville EndreBjørndal
December2009 MetteBjørndal
PanosPardalos
MikaelRo¨nnqvist
v
Contents
PartI PetroleumandNaturalGas
InvestmentStrategyofSovereignWealthFunds ............................... 3
TrondDøskeland
ChasingReserves:IncentivesandOwnership .................................. 19
PetterOsmundsen
Elastic Oil: A Primer on the Economics of Exploration
andProduction..................................................................... 39
KlausMohn
Applied Mathematical Programming in Norwegian
PetroleumFieldandPipelineDevelopment:SomeHighlights
fromtheLast30Years............................................................. 59
BjørnNygreenandKjetilHaugen
AnalysisofNaturalGasValueChains........................................... 71
KjetilT.MidthunandAsgeirTomasgard
OnModelingtheEuropeanMarketforNaturalGas.......................... 83
LarsMathiesen
EquilibriumModelsandManagerialTeamLearning .........................101
AnnaMetteFuglsethandKjellGrønhaug
RefineryPlanningandScheduling:AnOverview..............................115
JensBengtssonandSigrid-LiseNona˚s
vii
viii Contents
PartII ElectricityMarketsandRegulation
MultivariateModellingandPredictionofHourlyOne-Day
AheadPricesatNordpool.........................................................133
JonasAnderssonandJosteinLillestøl
TimeRegularitiesintheNordicPowerMarket:Potentials
forProfitableInvestmentsandTradingStrategies?............................155
OleGjølberg
ValuationandRiskManagementintheNorwegianElectricity
Market(cid:4) .............................................................................167
PetterBjerksund,HeineRasmussen,andGunnarStensland
Stochastic Programming Models for Short-Term Power
GenerationSchedulingandBidding.............................................187
TrineKroghKristoffersenandStein-ErikFleten
OptimizationofFuelContractManagementandMaintenance
SchedulingforThermalPlantsinHydro-basedPowerSystems..............201
RaphaelMartinsChabar,SergioGranville,MarioVeigaF.Pereira,
andNikoA.Iliadis
Energy Portfolio Optimization for Electric Utilities:
CaseStudyforGermany..........................................................221
SteffenRebennack,JosefKallrath,andPanosM.Pardalos
InvestmentinCombinedHeatandPower:CHP ...............................247
Go¨ranBergendahl
CapacityCharges:APriceAdjustmentProcessforManaging
CongestioninElectricityTransmissionNetworks..............................267
MetteBjørndal,KurtJo¨rnsten,andLindaRud
HarmonizingtheNordicRegulationofElectricityDistribution..............293
PerJ.AgrellandPeterBogetoft
Benchmarking in Regulation of Electricity Networks
inNorway:AnOverview..........................................................317
EndreBjørndal,MetteBjørndal,andKari-AnneFange
OnDepreciationandReturnontheAssetBaseinaRegulated
CompanyUndertheRate-of-ReturnandLRICRegulatory
Models...............................................................................343
L.PeterJennergren
Contents ix
PartIII NaturalResourcesandLogistics
RescuingthePreybyHarvestingthePredator:IsItPossible? ...............359
LeifK.SandalandSteinI.Steinshamn
Absorptive Capacity and Social Capital: Innovation
andEnvironmentalRegulation...................................................379
ArentGreve
IssuesinCollaborativeLogistics .................................................395
SophieD’AmoursandMikaelRo¨nnqvist
PilotAssignmenttoShipsintheSeaofBothnia................................411
HenrikEdwards
Transportation Planning and Inventory Management
intheLNGSupplyChain.........................................................427
HenrikAndersson,MarielleChristiansen,andKjetilFagerholt
PartIV GeneralProblemsandMethods
Optimal Relinquishment According to the Norwegian
PetroleumLaw:ACombinatorialOptimizationApproach...................443
HorstW.HamacherandKurtJo¨rnsten
AnOverviewofModelsandSolutionMethodsforPooling
Problems ............................................................................459
DagHaugland
CooperationUnderAmbiguity ...................................................471
SjurDidrikFla˚m
ThePerpetualAmericanPutOptionforJump-Diffusions....................493
KnutK.Aase
DiscreteEventSimulationintheStudyofEnergy,Natural
ResourcesandtheEnvironment..................................................509
IngolfSta˚hl
Overview of the Contributions
PartI:PetroleumandNaturalGas
Sovereignwealthfunds(SWF) isthenewnameforassetsheldbygovernmentsin
anothercountry’scurrency.Thesefundsaregrowingatanunprecedentedrate and
are becoming important players in global financial markets. Døskeland describes
thesefundsandclassifiesdifferentinvestmentstrategies.
Osmundsen discusseschallenges,incentives,andownershipofpetroleumreserves.
TheissuesarediscussedinrelationtotwocasestakenfromRussiaandBrazil.
Mohn describes how predictions from a geophysical approach to oil exploration
and production suggests that oil production will develop according to a predeter-
minedandinflexiblebell-shapedtrajectory,quiteindependentofvariablesrelating
totechnologicaldevelopment,economics,andpolicy.
NygreenandHaugen discussapplicationsofmathematicalprogrammingtoolsand
techniquesinfielddevelopmentplanningfortheNorwegiancontinentalshelf.
MidthunandTomasgard provideanoverviewofthenaturalgasvaluechain,mod-
elling aspects and special properties of pipeline networks that provide challenges
whendoingeconomicanalyses.
Mathiesen describes equilibrium models to analyze the European Market for
NaturalGas.
FuglsethandGrønhaug describehowequilibriummodelscanenhancemanagerial
teamlearningincomplexandever-changingsituations.
BengtssonandNona˚s surveytheplanningandschedulingofrefineryactivities.
The focus is on identification of problems, models, and computationaldifficulties
introducedbythemodels.
xi
xii OverviewoftheContributions
PartII:ElectricityMarketsandRegulation
Andersson and Lillestøl exploit multivariate and functional data techniques to
capture important features concerning the time dynamics of hourly day-ahead
electricitypricesatNordpool.
Electricityis a non-storablecommodityandelectricitypricesfollowfairly regular
fluctuations in demand, stemming from time dependent variations in economic
activityandweatherconditions.However,itispossibletostoreelectricityasadif-
ferentenergycarrier.TheseaspectsaredescribedbyGjølberg.
Bjerksund, Rasmussen, and Stensland analyze valuation and risk managementin
theNorwegianelectricitymarket.
Kristoffersen and Fleten provide an overview of stochastic programmingmodels
inshort-termpowergenerationschedulingandbidding.
Chabar, Granville, Pereira, and Iliadis present a decision support system that
determines the optimal dispatch strategy of thermal power plants while consider-
ingtheparticularspecificationsoffuelsupplyagreements.
Rebennack,Kallrath,andPardalos discussaportfoliooptimizationproblemoccur-
ringintheenergymarketwhereenergydistributingpublicserviceshavetodecide
howmuchoftherequestedenergydemandhastobeproducedintheirownpower
plant,andwhichcomplementaryamounthastobeboughtfromthespotmarketand
fromloadfollowingcontracts.
Bergendahl investigatestheadvantagesofinvestinginplantsforcogeneration,i.e.,
Combined Heat and Power (CHP), in case the heat is utilized for district heating.
AfocusissetonSwedishmunicipalitieswheretheseareanimportantpartofenergy
production.
Bjørndal, Jo¨rnsten, and Rud describe a price adjustment procedure based on
capacitychargesformanagingtransmissionconstraintsinelectricitynetworks.
AgrellandBogetoft analyzeelectricitydistributionsystemoperatorsandparticular
challengesintheNordiccountries.
Bjørndal,Bjørndal,andFange provideanoverviewoftheNorwegianregulationof
electricitynetworksaftertheEnergyActof1990.Variousdataenvelopmentanalysis
(DEA)modelsarediscussed.
Jennergren discusseselementarypropertiesofalloweddepreciationandreturnon
theassetbaseforaregulatedcompanyundertworegulatorymodels,thetraditional
rate-of-returnmodelandthemorerecentlongrunincrementalcost(LRIC)model.
