Academic journal article Economics & Sociology

Social and Economic Properties of the Energy Markets

Academic journal article Economics & Sociology

Social and Economic Properties of the Energy Markets

Article excerpt


Electricity and heat are used at energy markets, but they represent a special type of consumer goods with continuous production and consumption. Under the conditions of developed market relations, these goods are characterized by the complex nature of their consumer properties' interrelationships. On the one hand, they are substitute goods in relation to each other, with the distinctive feature of increased demand for one product along with an increase in price for another. with such interchangeable goods, a shortage or price increase of thermal energy leads to an increase in demand for electricity and, consequently, to an increase in its price later. On the other hand, with a certain model of organization of energy supply to consumers, electricity and heat can also have the properties of complementary goods, when the growth in demand or price for one product will also lead to an increase in demand and price for another one.

The most common case of organization of consumer energy supply, when electricity and heat can have consumer properties of complementary energy products, is organization of their joint production at a combined heat and power plant in an inseparable, combined cycle. In this case, heat and power supplied to the consumer are simultaneously produced at a combined heat and power plant in a single technological process. The growth in demand for heat energy, produced in conjunction with electricity in a combined cycle, is achieved by reducing fuel costs, which can be more than 2 times lower when produced on a separate thermal source (boiler house). Accordingly, increased demand for combined heat energy will also lead to increased demand for the electricity generated in the same cycle of production. And vice versa, if the demand for combined electric power is reduced in the power system, this will also lead to a reduction in the production of combined heat energy.

Lack of adequate accounting and analysis of the complex interconnection of consumer properties of electricity and heat leads to the emergence of cross subsidies in the energy sector of various countries, which has a devastating impact on the energy product markets and leads to the introduction of inefficient solutions, both in production and in consumption of energy. Ultimately, this causes a constant increase in the cost of energy products' provision to consumers, despite the efforts made by states aimed at increasing the economy of energy production and reducing fuel costs, including the efforts to increase the share of combined electricity and heat production.

1.Literature review

Recently, many countries have been actively discussing the issue of expanding the share of cogeneration of energy products, caused by the need for a significant reduction in fuel consumption in the energy sector (Konova et al., 2012; Lisin et al., 2014; Zlyvko et al., 2014; Wissner, 2014; Lisin et al., 2016; Sayegh, 2017; Werner, 2017; Samarina, 2018; Simionescu et al., 2017). It should in turn lead to an increase in the complementary relationship between electricity and heat as goods in energy markets (Kasperowicz et al., 2017; Pinczynski et al., 2016; Štreimikienė et al., 2016; Strielkowski et al., 2016; Ushakov and Kharchenko, 2018). Figure 1 that follows shows the assessment of the potential for cogeneration development in various countries of the world including BRICS countries, United States, Japan and major EU Member States.

Nowadays, the combined production of energy products with the organization of centralized heating for consumers is used to solve energy supply problems in many countries. At the same time, the share of cogeneration in the total volume of electricity and heat production ranges from 5% to 50%, depending on the country. At the same time, practically all countries have a significant reserve for increasing energy efficiency by increasing the share of cogeneration in the production of heat and electricity. …

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