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Abstract
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Power-to-gas (P2G) technologies within smart energy hubs (SEH) offer unprecedented operational flexibility to
distribution networks. This is achieved by integrating various energy carriers both regionally and locally,
particularly in the presence of renewable energy sources (RES). According to this subject, the present work
outlines an interactive risk-based model and meticulous mathematical solution to justifiably incorporate the P2G
units into the SEH to participate in the local electricity and natural gas markets strategically. As a price-maker
prosumer, the SEH utilizes cross-product arbitrage strategies to optimize its proposals for power and gas exchanges
in the local markets. The participation model for SEH is developed as a bi-level framework. At the top
level, the goal is to maximize SEH’s profit while accounting for the risks posed by RES. At the bottom level, the
aim is to increase social welfare under network constraints through local market settlements. Finally, a mathematical
program with equilibrium constraints (MPEC) is offered as a solution to solve the bi-level model. Using
integer disjunctions on the complementarity and slackness criteria and the strong duality theory on the bilinear
product terms, a mixed-integer linear programming (MILP) has been derived to approximate the suggested MPEC
formulation. It can be concluded from the results that the integration of P2G technologies and the use of mutual
product arbitrage in the local electricity and natural gas markets, not only increases the profit of the SEH, but
also reduces operating costs and improves social welfare as well as cost-recovery of the entire network.
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