Kjetil Trovik Midthun

Multi-horizon stochastic programming

Infrastructure-planning models are challenging because of their combination of different time scales: while planning and building the infrastructure involves strategic decisions with time horizons of many years, one needs an operational time scale to get a proper picture of the infrastructure’s performance and profitability. In addition, both the strategic and operational levels are typically subject to significant uncertainty, which has to be taken into account. This combination of uncertainties on two different time scales creates problems for the traditional multistage stochastic-programming formulation of the problem due to the exponential growth in model size. In this paper, we present an alternative formulation of the problem that combines the two time scales, using what we call a multi-horizon approach, and illustrate it on a stylized optimization model. We show that the new approach drastically reduces the model size compared to the traditional formulation and present two real-life applications from energy planning.

Adding flexibility in a natural gas transportation network using interruptible transportation services

We present a modeling framework for analyzing if the use of interruptible transportation services can improve capacity utilization in a natural gas transportation network. The network consists of two decision makers: the transmission system operator (TSO) and a shipper of natural gas. The TSO is responsible for the routing of gas in the network and allocates capacity to the shipper to ensure that the security of supply in the network is within given bounds. The TSO can offer two different types of transportation services: firm and interruptible. Only firm services have a security of supply measure, while the interruptible services can freely be interrupted whenever the available capacity in the transportation network is not sufficiently large. We apply our modeling framework on a case study with realistic data from the Norwegian Continental Shelf. The results indicate substantial increased throughput and profits with the introduction of interruptible services.

Risk Measures in Multi-Horizon Scenario Trees

Production assurance requirements are used to ensure that the operation of natural gas transportation networks is robust with respect to flow and production disruptions. They also affect strategies for optimal infrastructure investments. Motivated by a combined investment and operational optimization model for natural gas transport, we describe how to address such requirements through risk measure formulations such as Average Value-at-Risk. The large number of operational scenarios required for a meaningful analysis of the risk measures creates a computational challenge. A new scenario tree structure, multi-horizon scenario trees, can improve computational tractability. We investigate properties of the risk measures such as time consistency for such scenario trees and illustrate this discussion with a stylized example.

Value of multi-market trading for a hydropower producer

We present a case study for a price-taking hydropower producer trading in the three short-term energy markets, day-ahead, intra-day and the balancing market. The study uses a scheduling software with a detailed representation of a real Norwegian power plant optimizing the operations and trade for historical market data from 2015. The motivation for the study is to make an assessment of the value of trading in multiple markets relative to day-ahead trading only, utilizing a simplifying perfect foresight assumption. This gives the basis for assessing the value of developing more complex models with a more precise representation of uncertainty in the decision process. The analysis show a significant added value from participating in more markets than day-ahead, with the balancing market giving the largest contribution.

Natural Gas Networks

This article provides an introduction to natural gas networks. It describes the different network elements and some physical aspects of natural gas transportation. In particular, the article focuses on the special characteristics of natural gas transportation systems that lead to system effects and challenges for analyses. The article also categorizes and outlines typical optimization problems encountered when analyzing natural gas networks on a strategic, tactical, or operational horizon. In addition, the article discusses how uncertainty in this setting can be handled.

Analysis of Natural Gas Value Chains

In this paper, we provide an overview of the natural gas value chain, modeling aspects and special properties that provide challenges when doing economic analysis. We present a simple value chain optimization model and discuss important properties of this model.

The Portfolio Perspective in Electricity Generation and Market Operations

Selecting portfolios of electricity production assets, energy sources and market participation strategies facilitates usage and management of complementary resources. It helps also power producers to address uncertainties and to balance profit contributions, costs and risks. Therefore, portfolios should be composed wisely. Our paper will bring concepts of portfolio optimization closer to private energy producers. We highlight important aspects to be considered and outline key value drivers. However, we call also for critical thinking if portfolios of physical assets should be considered a panacea to address uncertainty in power generation and market operations. An example demonstrates that, sometimes, financial instruments rather than diversification into renewables may prove more efficient to hedge risk. In addition to the possibility of hedging through the portfolios, portfolio management can yield benefits for internal physical balancing and market access - but the value in terms of additional profit and risk reduction depends on market conditions.

Planning of an Offshore Well Plugging Campaign: A Vehicle Routing Approach

When a petroleum well no longer serves its purpose, the operator is required to plug and abandon (P&A) the well to avoid contamination of reservoir fluids. An increasing number of offshore wells needs to be P&A’d in the near future, and the costs of these operations are substantial. Research on planning methods in order to allocate vessels that are required to perform these operations in a cost-efficient manner is therefore essential. We use an optimization approach and propose a mixed integer linear programming model based on a variant of the uncapacitated vehicle routing problem that includes precedence and non-concurrence constraints to plan a plugging campaign. P&A costs are minimized by creating optimal routes for a set of vessels, such that all operations that are needed to P&A a set of development wells are executed. In a case study, we show that our proposed optimization approach may lead to significant cost savings compared to traditional planning methods and is well suited for P&A planning purposes on a tactical level.

Tactical Portfolio Planning in the Natural Gas Supply Chain

We present a decision support tool for tactical planning in the natural gas supply chain. Our perspective is that of a large producer with a portfolio of production fields. The tool takes a global view of the supply chain, including elements such as production fields, booking of transportation capacity, bilateral contracts and spot markets. The bilateral contracts are typically take-or-pay contracts where the buyer’s nomination and the prices are uncertain parameters. Also the spot prices in the market nodes are uncertain. To handle the uncertain parameters, the tool is based on stochastic programming. The goal for the producer is to prioritize production over the planning period in a way that makes sure that both delivery obligations are satisfied and that profits are maximized. The flexibility provided by the short-term markets gives the producer a possibility to further increase his profits. Production and transportation booking decisions in the early periods are taken under the uncertainty of the coming obligations and prices which makes flexible and robust solutions important. There will be a trade-off between maximum profits and robustness with respect to delivery in long-term contracts.