A System Dynamics model of gas and power interdependence: the case of the United Kingdom
The increasing dominance of natural gas in power generation in the UK since the 1990s has led to growing interdependence between its gas and power sectors. From the perspective of the power sector, the security of supply of the natural gas industry has implications on the security of supply of the power industry. Following the gas sector’s perspective, demand from the power sector is more uncertain than other types of natural gas demand, posing challenge for the long-term contracting of supply and planning of infrastructure. Given this interdependence, only considering one of the industries in designing and evaluating energy policies to fulfil the UK’s energy agenda can lead to skewed perceptions and unintended consequences.
This paper seeks to explore the impact of proposed regulation targeting energy security and sustainability on the extended gas-to-power supply chain, through scenario-based simulation using a System Dynamics (SD) model. The SD model is scoped to focus on industry agents that participate in the gas and power wholesale markets. The expected outcome of this research is an improved understanding of the nature, strength and dynamics of interdependencies between the investment decisions of the UK industry in power generation, gas production, pipeline/LNG terminal construction, under demand and global energy market uncertainty.