Session 2. Monday February 8, 2010 Module A.2 Power system operation & management (2 of 2) Prof. Ignacio J. Pérez-Arriaga Engineering, Economics & Regulation of the Electric Power Sector ESD.934, 6.974 2!Outline!• Background"• The technological perspective"• The economic & managerial perspectives!– Economic data & orders of magnitude"– Time scales"• Expansion planning"• Operation planning"• Operation"• Protection & control"3!Economic data & orders of magnitude 4!Energy units & conversion factors!• Source: International Energy Agency (IEA), US DOE, The Atlas of Climate Change"Economic relevance of the power sector in the US!6!• Accounts for 42% of primary energy consumption"• Accounts for 35% of U.S. fossil fuel consumption"• Uses almost no petroleum"• Accounts for 40% of U.S. CO2 emissions"• Relies mainly on North America for fuel"• Consumption is expected to grow faster than the rate of energy consumption"The power sector in the US (1 de 3)"7!The power sector in the US (2 de 3)"• Annual revenues (from consumers) > b$250"• Total asset value > b$800"• Generation 60%, Distribution 30%, Transmission 10%"• Ownership (3100 entities)!• 213 Investor Owned Utilities: 74% consumers"• IOU ownership of generation was 71% of capacity in 1996 and 38% now"• While IPP ownership has increased from 8% to 41% "• 2000 Public Owned Utilities: 15% consumers"• 930 cooperatives: 11% consumers"8!The power sector in the US (3 de 3)""US Electricity Market in numbers!• Average Residential Monthly Use: "936 kWh"• Average Residential Monthly Bill: "$99.70"Retail Prices (c/kwh) # Customers Residential 10.65 123,949,916 Commercial 9.65 17,377,219 Industrial 6.39 793,767 Transportation 9.7 750 Total 9.13 142,121,652 10!Price of electricityUS Electricity Market in numbers!• State Electricity Price Rankings"– Highest - Hawaii: " 21.29 c/kwh"– Lowest - Idaho:" 5.07 c/kwh"14!Time scales in power systems management15!The question!• How can it be possible to meet the demand at any time efficiently and reliably, for an infinite time horizon and under uncertainty?"The answer: Use a temporal hierarchy of decisions"– Decision functions hierarchically chained"– Each function optimizes its own decisions subject to"• Its own constraints"• Constraints that are imposed from “upstream”"The temporal hierarchy of decisions Source: Bryan Palmintier!Courtesy of Bryan Palmintier. Used with permission.17!Time scales (1)!18!Time scales (2)!19!Representative functions & models!• Analysis of electromagnetic transients"• Protection coordination"• Short circuit analysis"• Stability analysis"• Load flow"• State estimation"• Security / contingency analysis"• Load forecasting"• Economic dispatch"• Optimal load flow"• Unit commitment"• Hydrothermal coordination"• Reliability / adequacy analysis"• Risk assessment"• Investment (generation / transmission) planning"Regulatory paradigms!• Two regulatory paradigms"– Centralized – Traditional, regulated monopolies!– Decentralized – De-regulated, market-oriented"• Both regulatory approaches seek to achieve the same basic objective!– in theory they only condition the decision-making process, but not the outcome"– in practice they condition the outcome of planning and operation"Traditional regulation – context!• Monopolies with geographic franchises"• Vertically integrated businesses"• Centralized operation and expansion"– Cost minimization"• Cost of service-based remuneration!– Fixed investment costs (plant, line construction...) €/MW"– Variable operating costs (fuel consumption, maintenance, ...) €/MWh"• Tariff-based prices for users; utilities subject to mandatory supply obligations"• Minimum (cheap) risk assumed by consumers!Liberalized regulation - context!• De-regulate activities"– Freedom to invest and operate"• Attract private, international investment"• Allow new and more efficient initiatives"– Decentralization!– Introduce competition to"• Lower costs"• Encourage demand-side participation"• Unbundle business activities"– Competitive: generation and retailing"– Natural monopolies: transmission and distribution"Liberalized regulation - context!• Market mechanisms govern generation investment and operating decisions"– supply-demand balance sets prices & amounts!• Wholesale Market"– remuneration based on the competitive sale of the “electricity product” €/MWh"• Short-term sales (pool – balancing markets)"• Long-term sales (OTC contracts)"– higher (expensive) risk, assumed by investors!– maximized individual profit and market balance"Liberalized regulation - context!• Market mechanisms govern power retailing decisions"– Distinction between the “wire” business (likened to roads) and the business of selling power (likened to tomatoes), distributed across wires"– Notion of customer!– Absence of tariffs"– Retailing valued for the added value offered to customers"Expansion planning:"Centralized environment!Operation model!Generation expansion model!Environmental issues!Strategic issues!Network expansion model!Generation expansion planning!Network expansion planning!Network security analysis!Database!Load & fuel prices forecasting!26!Generation expansion planning"(in a liberalized regulatory framework)!• Every agent decides by itself"• It is a typical investment planning decision under uncertainty"– Key point is the evaluation of future market behavior"• market price"• new investments of competitors"• fuel prices"• demand growth"27!Network expansion planning"(in a liberalized regulatory framework)!• No radical changes with traditional regulation"• Transmission"– Generation expansion is unknown  uncertainty"– Most frequent: centralized planning under supervision of regulator and cost-of-service remuneration"• Distribution"– Distributor decides network expansion in its franchised territory"– Distributor is subject to quality of service conditions"– Diverse remuneration schemes are possible" Operation planning (medium term):" Centralized