 |
Center for Nonlinear Studies |
In the past decade, the North American power grid has faced wintertime reliability issues on multiple occasions as it becomes more dependent on the real-time delivery of natural gas supplies at power plants. The recent Texas energy soap opera is just the latest and most extreme example of the power grid's difficulty in adapting to the recent dash for natural gas. Using historical power plant operational and availability data for New England, we investigate the frequency with which fuel starvation events affect the availability of gas-fired power plants. During the 2014-2015 polar vortex event in New England, up to 25% of unplanned outages were caused by fuel delivery failures to gas-fired power stations. On-site gas storage could have mitigated many of these unplanned outages at costs similar to duel-fuel capability and at a lower cost than battery energy storage. The emergence of gas storage for power plants, however, raises some competitive concerns. We formulate a cooperative game model of a natural gas and electricity market where gas-fired power plants and the owners of storage facilities maximize joint profits over both markets. A potential cooperative strategy for cross-market manipulation emerges where a loss in the power market subsidizes increased profits in the natural gas market, raising joint profits across both markets. The success of such a strategy depends on natural gas prices being high (as was the case during the New England polar vortex or the recent event in Texas) and the cooperative arrangement involving highly efficient natural gas plants with relatively low marginal costs. This work suggests that on-site gas storage can be an economical way ensure fuel security at power plants, but the competitive effects of fuel security measures need to be recognized and mitigation strategies formulated.
Host: Anatoly Zlotnik