On the Value of Dual-Firing Power Generation Under Uncertain Gas Network Access
This work is concerned with the impact of gas network disruptions on dual-firing power generation. The question is addressed through the following optimization problem. Markets drive the price of gas, oil, and electricity. The log-prices evolve as correlated mean-reverting processes in discrete time. A generating unit has dual-firing capabilities, here in the sense that it can convert either gas or oil to electricity. Oil and gas are subject to different constraints and uncertainties. Gas is obtained in real time through the gas network. Due to gas supply disruptions, gas access is not guaranteed. Oil is stored locally and available in real time. The oil storage capacity is limited onsite. Oil can be reordered to replenish the oil tank, with a lead time between the order time and the delivery time. Oil is paid for at the order time price. In this paper, we formulate the stochastic optimization problem for a risk-neutral operator, and study the sensitivity of the value of the dual-firing generating unit to the gas network availability parameters.
KeywordsDual-firing Power generation Energy asset management Natural gas-electric coordination Resilience Markov decision processes Optimal control Dynamic programming Stochastic optimization
MSC (2010):90B05 90B25 90C15 90C39 90C40
This material is based upon work supported by the National Science Foundation under Grant No. 1610825.
- 5.Deng, S.: Pricing electricity derivatives under alternative stochastic spot price models. In: 33rd Annual Hawaii International Conference on System Sciences (HICSS), pp. 10–20 (2000)Google Scholar
- 6.Total Electric Power Industry Summary: U.S. Energy Information Administration. https://www.eia.gov/electricity/annual/
- 9.Fleten, S.E., Näsäkkälä, E.: Gas-fired power plants: investment timing, operating flexibility and CO\(_2\) capture. Energy Econ. 32(4), 805–816 (2010)Google Scholar
- 10.Geman, H.: Mean reversion versus random walk in oil and natural gas prices. In: Advances in Mathematical Finance, pp. 219–228. Springer (2007)Google Scholar
- 15.Koeppel, G., Andersson, G.: The influence of combined power, gas, and thermal networks on the reliability of supply. In: 6th World Energy System Conference, pp. 10–12. Torino, Italy (2006)Google Scholar
- 22.Munoz, J., Jimenez-Redondo, N., Perez-Ruiz, J., Barquin, J.: Natural gas network modeling for power systems reliability studies. In: Proceedings of the 2003 IEEE Power Tech Conference, pp. 1–8. Bologna, Italy (2003)Google Scholar
- 23.Special Reliability Assessment: Potential bulk power system impacts due to severe disruptions on the natural gas system. North American Electric Reliability Corporation (2017)Google Scholar
- 30.Webster, M., Schmalensee, R.: Growing concerns, possible solutions: the interdependency of natural gas and electricity systems. Technical report, MIT Energy Initiative (2014)Google Scholar