Implementation of a Scheduling and Pricing Model for Natural Gas

Since 1999, the Australian state of Victoria has operated a natural gas spot market to both determine daily prices for natural gas and develop an optimal schedule for the market based on an LP (Linear Programming) approximation to the underlying inter-temporal nonlinear aspects of the gas flow optimization problem. This market employs a dispatch optimization model and a related market clearing model. Here we present the model employed for both the operational scheduling and price determination. The basic dispatch optimization formulation covers the key physical relationships between pressure, flow, storage, with flow controlled by valves, and assisted by compressors, where flow and storage are measured with respect to energy rather than in terms of mass. But we also discuss a range of sophisticated mathematical techniques which have had to be employed to create a practical dispatch tool, including iterating between piecewise and successive linearization; iterating between barrier and simplex algorithms to manage numerical accuracy and solution speed issues, and special methods developed to deal with scheduling flexibility. The market clearing model is a variation on the dispatch optimization model which replaces the gas network with an infinite storage tank with unlimited transport capacity. We address the performance of the model including accuracy and run time.