Integrated electricity and gas market modeling – effects of gas demand uncertainty


This paper develops an integrated fundamental investment model which considers both the gas and electricity sector. Furthermore, we adopt the theory of stochastic programming with recourse in the combined model to account for uncertainty in the gas market. This approach enables us to analyze how uncertain gas demand in other sectors affects decisions to invest in electricity generation capacities. We find an overall decrease and a reallocation of investments in gas-fired power plants. We also quantify the expected costs of ignoring uncertainty.