A system dynamics approach to study the long-term interaction of the natural gas market and electricity market comprising high penetration of renewable energy resources

Abstract

Due to the gas consumption of some power plants for electricity generation and providing an acceptable level of flexibility, the interaction of natural gas markets and electricity markets is inevitable. One of the main challenges of policymakers in the energy sector coupling is the investigation of such interactions. Our main goal is to analyze the effect of the penetration of renewable energy resources on the behavior of gas markets and vice versa from the policymaker’s viewpoint. Moreover, we tend to study the effect of an external shock on the behavior of the whole system and the role of renewable resources in mitigating these side effects. Therefore, we used System Dynamic Approach to model the long-term behavior of the natural gas markets to extend the existed models of the electricity markets behavior and couple these markets. The Net Present Value method was used for the economic assessment of the investment in the development of gas reserves, and new stock and flow variables were defined to simulate this development. The simulations are performed for four scenarios by using a valid case study. Considering the results of simulations and sensitivity analysis, as the wind capacity incentive rose, the gas and electricity prices declined and their fluctuation increased during the time horizon. Although the effect of the gas market shock on the system depends on the time of occurrence, as the penetration of renewable units increased, the severity of its side effects decreased and the price jumps in the markets were mitigated.