Coordinating fuel inventory and electric power generation under uncertainty

We discuss the problem of hedging between the natural gas and electric power markets. Based on multiple forecasts for natural gas prices, natural gas demand, and electricity prices, a stochastic optimization model advises a decision maker on when to buy or sell natural gas and when to transform gas...

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Bibliographic Details
Published in:IEEE transactions on power systems 2001-11, Vol.16 (4), p.603-608
Main Authors: Takriti, S., Supatgiat, C., Wu, L.S.-Y.
Format: Article
Language:English
Subjects:
Benders decomposition
Contracts
Demand
Electric power generation
Electricity
Electricity supply industry
Fuels
Lagrangian functions
Markets
Mathematical models
Natural gas
Optimization
Power generation
Power system modeling
Sparks
Stochastic processes
Uncertainty
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Summary:We discuss the problem of hedging between the natural gas and electric power markets. Based on multiple forecasts for natural gas prices, natural gas demand, and electricity prices, a stochastic optimization model advises a decision maker on when to buy or sell natural gas and when to transform gas into electricity. For relatively small models, branch-and-bound solves the problem to optimality. Larger models are solved using Benders decomposition and Lagrangian relaxation. We apply our approach to the system of an electric utility and succeed in solving problems with 50000 binary variables in less than 4 minutes to within 1.16% of the optimal value.
ISSN:0885-8950
1558-0679
DOI:10.1109/59.962403