Operating Strategy of LNG Terminal in Interdependent Electricity and Natural Gas Markets

Abstract

With the ever strengthening interdependence between electricity and natural gas (NG) systems, the outcomes of the two energy markets could be affected by market entities from both markets. The existing studies mainly discuss the strategic behaviors of market entities participating in directly the two energy markets, lacking the concentration on the market entities participating in one single market while they could still pose impacts on the other market via the interdependence between the two markets. This paper studies the operating strategy of liquified NG (LNG) terminal, by describing the problem as a NG market game and an electricity market game. The problem is then reformulated as a bi-level single-leader multi-follower mix-integer programming (MIP) model where the LNG terminal acts as the leader while the NG fired power plants (NGPPs) as the followers. The model could be converted to a single-level one with the value-function method, and the interaction between the leader and followers is addressed with the sample-based algorithm, combined with the diagonalization algorithm to find the equilibrium among followers. The case studies further demonstrate the feasibility and effectiveness of the proposed methodology and illustrate the outcomes of the interdependent electricity and NG markets with the strategic LNG terminal.