Optimal short-term natural gas nomination decision in generation portfolio management

Abstract

Because the short-term natural gas markets usually close earlier than the electric power markets, most generation companies have to make fuel nomination for natural gas fired power plants (NGFPP) without knowing the actual generation levels, which depend on many uncertain factors such as, new market driven unit commitments, load variations, dispatch instructions, and/or other service requests next day. This is a new issue in electric power market. A novel two-step simulation-optimization framework for valuation of day-ahead natural gas nomination is proposed in this paper. In Step I, the optimal generation levels and profit distributions of feasible gas nomination decisions are simulated, and gas nomination decision is based on Utility Maximization Theory in Step II. The impacts of most major factors such as variable load, price volatilities and long-term fuel contract/storage are considered in this framework. An application of the proposed framework is demonstrated by a numerical example. The results show that the proposed framework is desirable in several key aspects. Copyright © 2010 John Wiley & Sons, Ltd.