When Two Worlds Collide: Synchronizing the Power and Gas Markets

The ongoing debate over how best to combat greenhouse gas (GHG) emissions has led to a steady shift from coal as the dominant fuel-type for electric power plants, to the more CO2-friendly natural gas. New gas-fired plants can react quickly to unanticipated changes in wind and solar generation. In addition, the popularity of gas-fired generation has benefitted from very low natural gas prices over the last eight years.

As a result of the increased penetration by gas, some regions such as the Northeast, can attribute more than 50 percent of their gas offtakes due to gas-fired power plants. This interdependence between power and gas has resulted in significant inefficiencies due to the two markets being out-of-sync.

On days when power price volatility is high, the gas generators often need to ramp up or down at sub-hourly intervals. During these periods of high volatility, if the gas market cannot react quickly to surging gas demand, the result can be significant gas shortages and further price volatility in the power markets. In an effort to curb the effect of misaligned power and gas markets, it has been suggested that the gas markets coordinate with the power market at hourly intervals rather than the current daily intervals.

Such coordination between two largely independent systems will be challenging and will require buy-in from many stakeholders, including gas local distribution companies (LDCs), power plant owners, municipalities, the North American Energy Standards Board (NAESB), and more. However, with OATI, handling both power and gas at hourly — or even sub-hourly — scheduling intervals becomes much easier. In fact, the OATI Energy Trading and Risk Management (ETRM) software solutions are built on a common framework designed to ease synchronization of the power and gas industries.

OATI’s physical power trading software solution offers marketers, merchant utility groups, and generation operators efficient power scheduling and transmission management, as well as support for daily business operations. With multiple levels of deal locking, an audit trail of user entries into the system, and more, this comprehensive web-based trading system ensures your data is secure.

Similarly, the OATI natural gas trading and risk management solution streamlines natural gas trading and generation management operations. The intuitive scheduler display shows real-time data updates and calculations, effectively reducing errors and overscheduling for the front-to-back office.

Interested in learning how OATI can support your power and gas market needs? Please contact Sales@oati.net.

About the Author: 
Mr. Salah Khuhro has over 18 years of experience in the ETRM industry. As Associate Vice President of Sales at OATI, Mr. Khuhro oversees the strategies to provide optimal ETRM solutions to Investment Banks, Power Marketers, Independent Power Producers (IPPs), and Hedge Funds. His experience in power trading, scheduling, and settlements allows Mr. Khuhro to develop strategic recommendations that meet clients’ ETRM business needs.