Abstract

In recent years, the electric power industry has benefited from decreases in natural gas prices. These low prices have encouraged the installation of natural gas-fired power plants and have increased connections between natural gas and electric power systems. However, despite their dependencies, the gas and power industries have technical, political and commercial constraints that often force them to plan, operate and manage in isolation. Such limitations sometimes lead to undesirable outcomes, such as those experienced by both systems during the winter of 2013/2014 in the northeastern United States. In this paper, we focus on reducing the technical and computation limitations. We first present a mathematical model of combined gas and power systems and apply it to planning problems where expansion and upgrades are needed to meet increased demand. We second describe our previous work in convex relaxations that have yielded promising results. Finally, we introduce a gas-price elasticity model that includes the effects of gas-price volatility caused by congestion of the integrated gas-grid expansion system.

Introduction

Recent advances of cheap natural gas extraction technologies have led to record low prices for natural gas during the last decade. This drop in price has led to shifts from other fuels used by electric power systems to natural gas to produce electricity. In most cases, the fuels used by generators in power systems are procured days in advance. More importantly, perhaps, there is limited competition for the fuel. However, procurement of natural gas is different. Often, gas-fired power generators do not have firm natural gas contracts and procure their gas on the open market a day in advance at most. Thus, they are exposed to significant competition from other sectors (such as heating). As a result, while cheap natural gas has driven the price of electricity down, it has also increased fuel supply risk in power systems. Recent experiences in the northeast United States, such as during the winter of 2013/14, have highlighted this risk. Record cold temperatures directed gas supply to heating applications and left power systems scrambling for alternate sources of power. In this case, there were no blackouts due to generation shortages, but there were significant economic consequences [1], [2].

The risk associated with increased reliance on natural gas is influenced by a number of factors, of which one is the separation in management and operation of gas and power systems. This separation exists for a number of reasons. From a technological perspective, problems that join both systems are computationally very difficult and discourage joint management. In addition, in many places, the sectors are prohibited from coordinating activities or disjointed market structures discourage coordination.

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