Class 1Economic systems for electric
power planning
Professors Jim McCalley and Leigh Tesfatsion
WEBSITES
Dr. McCalley’s: http://home.eng.iastate.edu/~JDM/ee458_2011/ee458schedule.htm
Dr. Tesfatsion’s: http://www2.econ.iastate.edu/classes/econ458/tesfatsion/Home458Team.htm
General rule: Use the site of the instructor giving the lectures.Comments: • Links on each will take you to the other. • Generally consistent although differences exist and reflect
the different orientations of the instructors.• Different orientations of instructors reflect economic
/engineering requirements of electricity markets
Assignments for this week
1. Read Paper on JDM website linked by the name of “California Crisis Explained.” Complete HW1 (also on JDM website) to turn in on Friday 8/26.
2. Read notes on JDM website linked by “Market Summary ,” called “Overview of Electricity Markets.”
3. Read chapter 1 in Textbook.4. Read “Notes on cost curves” from JDM website.
What this course is about
The electric industry and ….
Its characteristics before,but mainly its characteristics after
Before, and after what?
What happened?
DeregulationPrivatization
Vertical disaggregation Functional unbundling
Introduced marketsBrought competition
When did this happen?
Apr 1990: UK Pool
opens
Jan. 1991: Norway launches Nordpool
Jan. 1996: Sweden in Nordpool
Oct 1996: New
Zealand NZEM
Jan 1998: PJM ISO created
Mar 1998: Cal ISO opens
Jan. 1998: Finland in Nordpool
Dec 1998: Australia
NEM opens
Nov 1999: NY ISO launches
May 1999: ISO-NE
opens
Jan. 2000: Denmark in
Nordpool
Mar 2001: NETA
replaces UK Pool
July 2001: ERCOT becomes
one control
area May 2002:
Ontario IMO
launches
North America
1990 1992 2000 1998 1996 1994
Jan. 2001: Alberta Pool opens
Overseas
2002 2004 2006
Dec 2001 MISO becomes first RTO
Feb 1996 MISO formed.
April 2005 MISO Markets Launch
1996: ERCOT becomes ISO.
Jan 2002 ERCOT opens retail zonal mrket
2008 Feb 2007 SPP Markets Launch
Dec 2008 ERCOT Nodal Market
Launched
Well, sort of, actually, it all started much earlier…
What was it before?
A monopolistic, and regulated, industryIn any given region, there is only one organization from which to buy.Other organizations are blocked. Reasons for giving monopoly status can vary, but in the electric industry, the main reason was…
Economies of scale…when average cost of production, $/MWhr, decreases as generation plant gets larger.
Economies of scale
Four 250 MW Plants1000 MW Plant
$40/MWhr $50/MWhr
And this drove all thinking in the electric industry from 1900 until the early 1960’s.And then what happened?
Three things1. Smaller plants began to look more economic . Why?
a) Large plants takes years to build, often must be located far away, and create havoc when they outage. Smaller plants • are built more quickly and their construction costs are consequently subject to
less economic uncertainty;• can be located more closely to load centers, an attribute that avoids
transmission, decreases system losses, & is advantageous for system security;• are generally more reliable, and less consequential when they do outage.
b) Combined cycle units, attractive because of high efficiency, have to account for design complexities due to coupling between CTs & HRSGs driven by waste heat from the CTs, and so tend to be lower in rating.
c) Cogeneration facilities, attractive because of high efficiency, typically have lower ratings as a result of their interdependency with the industrial steam processes supported by them.
d) Plants fueled by renewable energy sources (biomass, wind, solar, and independent hydro), attractive because of their low operating expenses and environmental appeal, also tend to have lower ratings.
Three things2. Reaganomics – and public approval of less tax, less
government, less regulation and being competitive.3. Fred Schweppe:
• F. Schweppe, “Power Systems 2000,” IEEE Spectrum, Vol. 15, No. 7, July 1978.• F. Schweppe, R. Tabors, J. Kirtley, H. Outhred, F. Pickel, and A. Cox, “Homeostatic Utility
Control,” IEEE Trans. Pwr. App. And Sys., Vol. PAS-99, No. 3, May/June 1980.• M. Caramanis, R. Bohn, and F. Schweppe, Optimal spot pricing: practice & theory, IEEE
Transactions on Power Apparatus and Systems, Vol. PAS-101, No. 9 September 1982.• F. Schweppe, M. Caramanis, R. Tabors, R. Bohn, “Spot Pricing of Electricity,” Kluwer, 1988.
And this is what it looks like today…
But what do these mean?
Vertical disaggregation Functional unbundling
1900-199?
G G G
G
G
G
G G
Transmission and System Operator
Vertically Integrated Utility
1900-199?
G G
G
G
G
G
G
G
TransmissionOperator
IndependentSystem
Operator
TransmissionOperator
TransmissionOperator
Today
G G G
G
G
G
G G
Transmission and System Operator
Vertically Integrated Utility
And the ISO/RTO runs the markets
Which leads to the course objectives• characterize existing electric industry structure and market systems; • solve linear programming and integer programming problems using commercial
optimization software packages; • use the two basic electric energy market computational tools: security constrained
optimal power flow and security constrained unit commitment; • determine electricity and transmission prices, how they affect the transmission
expansion of electric power systems; • be conversant with transmission and resource planning tools and procedures used by
today’s industry.