Session 1. Wednesday February 3, 2010 Introduction Prof. Ignacio J. Pérez-Arriaga Engineering, Economics & Regulation of the Electric Power Sector ESD.934, 6.974 2 Do you agree with this rule?!!“On Oct. 23, 2009, FERC approved a MISO interim proposal for spreading costs associated with network upgrades that are needed to accommodate new generation interconnection. Under the new scheme, generators will pay 100% of the interconnection costs for lines below 345kV and 90% for facilities at or above 345kV (with the extra 10% paid by all of MISO), a cost that is too high for the wind generators, the national wind association contends”.!!(Source: Energy Washington Week, 19 Nov-2009)!3 Does this make sense to you?!!The availability of credits can be further complicated by potential economic mechanisms, whereby coal plants “may choose to limit operating hours in order to sell their emission credits as green house gas constraints increase”!!Terry Boston, President and CEO of PJM Interconnection in Norristown, PA, in reference to the potential distortions that CO2 emissions could bring to the electricity market. !!(Excerpt from NERC 2008 Climate Initiatives report)! 4 Some questions! Should cogeneration be subsidized?" Why so little investment in transmission lines took place in the US for more than a decade, until recently? Should anybody do something about it or should it be left to market forces?" Should the remuneration of distribution utilities be linked to the level of quality of service that they provide?" Are smart meters a good idea? Are the potential benefits worth the cost & trouble of changing the present meters?" How to compute electricity tariffs?"5 More questions! Should the purchase of electricity be liberalized as the telecom service or a regulated tariff is fine?" How to detect if agents in a wholesale electricity market are abusing any market power they might have? Can this market power be mitigated somehow?" Can investment in generation capacity be left entirely to the market or some kind of intervention is warranted?" What is going on in the electricity sector around the world? Are liberalization & markets really working?" 6 And still more questions! Are the “standard tax credits” that are presently used in the US a sound mechanism to promote generation from renewable sources such as wind?" Why the feed-in tariffs of Germany, Denmark & Spain are so successful? Or are they maybe too successful? Is there a fool-proof method to promote renewables?" Can one rely on markets to achieve sustainability objectives? How to mix markets & public policies?" Has the worldwide liberalization process been successful in increasing the rate of electrification for the one third of mankind without access to electricity? What is the right approach?"7 What this course is not (1 of 2)! 6.691. Seminar in electric power systems!- Focus is on detailed engineering aspects of modeling power devices & systems" 6.061. Introduction to electric power systems!- A sound engineering power systems course, with no economics or regulatory content" 14.44. Energy economics & policy!- Focus is on economic models & instruments for a variety of sectors (including electricity; requires significant economic background)" 8 What this course is not (2 of 2)! 1.801. Environmental law, policy & economics: Pollution prevention & control!- Focus is on legal & general environmental aspects " 1.816/11.369. Energy policies for a sustainable future!- More general, less emphasis on regulation, all energies instead of just power systems"9 What this course is about! Basically restricted to the electric power sector" Covers technological, economic & legal aspects, without a formal treatment of any one of them" Focus (& this is the spinal cord of the course) is on regulatory aspects, thus making use of engineering, economy & law"- No formal training in any of these matters is required, although it is very welcome" Addresses current open issues in the regulatory practice & research" 10 Logistics! Introductions" Classroom (speak up!)" Syllabus" Resources, books on reserve" Recitations " Homework, Term paper (and marathon day)" Grading" Visit to ISONE" Slides (more in handout than shown in class)! Office hours ! Punctuality (the class will start / finish¿? on time)!11 11!Homework 1! Select one power system of interest to you, preferably within the provided list" During the course you will have to learn about it, analyze it under different viewpoints and suggest improvements to its regulatory framework. It may used also in the term paper" This first assignment just consists of making your choice and writing a few pages (a couple of pages is enough) with the system you have chosen, reasons for it and the sources of information that you have found so far" Get familiar with the “Resources” document" 12 12!Term paper! Options "1. Individual"• From a list of prescribed topics"• Exceptionally: a studentʼs proposed topic"2. Team (groups of 3), a large case study with N topics to be prepared/defended individually/collectively"13 Questions?Session 1. Wednesday February 3, 2010 Module A. Session 1 Power system operation & management (1 of 2) Prof. Ignacio J. Pérez-Arriaga Engineering, Economics & Regulation of the Electric Power Sector ESD.934, 6.974 2!Study material!• “Electric energy systems: An overview”, by I.J. Pérez-Arriaga, H. Rudnick & M. Rivier; chapter 1 of the book: "– Gómez-Expósito, A., Conejo, A.J. & Cañizares, C., editors. (2009) Electric energy systems: Analysis and Operation. CRC Press, Taylor & Francis Group. "• “Resources”"3!Readings!This is background information that can be read at any time"• “The role of electricity”, Eurelectric, 2007"• “EPRI PRISM study: The power to reduce CO2 emissions”, Electric Power Research Institute (EPRI), 2007"• “Low carbon electricity systems”, KEMA, 2009"4!Electric power systems… A first impressionThe US is actually three interconnected systems… … and here they areThis is the “classical” path of electricity: generators  networks  demand 12!A power system in schematic form ...!!18!Electric power systems"The different perspectives!•