07/08/200307/08/2003 11
Economic Benefits From Economic Benefits From Integrated Electricity Integrated Electricity
MarketsMarketsBrian H. Bowen
F.T. SparrowZuwei Yu
Geoff GranumPower Pool Development Group
Purdue University, U.S.A
South Asia Regional Initiative in Energy Training ProgramJuly 19-23, 2003, Dhaka Bangladesh
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Purdue University
OverviewOverviewMany sound economic reasons exist for the development of regional electricity power pools. Let us consider the how when where and why as this topic relates to the economic growth of the South Asia region. Clearly electricity growth and economic development are closely related and whichever leads the other is open for debate. We make a good start by considering the experiences from other power pools and the use of the Purdue University models which include generation and transmission characteristics.
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Purdue’s Energy Trade Modeling SystemsPurdue’s Energy Trade Modeling Systems
Purdue’s SUFG has developed four major Purdue’s SUFG has developed four major energy planning decision support tools:energy planning decision support tools:Traditional rateTraditional rate--based regulation models.based regulation models.1010--year forecasting model for Indiana and year forecasting model for Indiana and ECAR/MAIN under free competition.ECAR/MAIN under free competition.ShortShort--run forecasting models for ECAR/MAIN run forecasting models for ECAR/MAIN peak hour prices.peak hour prices.Up to 20Up to 20--year forecasting for energy and year forecasting for energy and reserve trade models (SAPP & WAPP).reserve trade models (SAPP & WAPP).
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Electricity Market ModelingElectricity Market Modeling& & CostCost--Price Demand Feedback LoopPrice Demand Feedback Loop
Initial Prices& MarketStructure
Growing CustomerDemand
Utility SupplyThermal/HydroTechnologies
RegulatoryFrameworkRatesFinance
EquilibriumPrices
InvestmentPlans
Demand/TransmissionReliability
Costs/Trade
Pricing Policy/Contracts/Spot Markets
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Benefits from Power PoolingBenefits from Power Pooling
“Tight vs. Loose”
• Economies of Scale• Lower Reserve Requirement• Load Diversity• Economies of Operation• Cooperative Stimulus
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Electricity Needs of South AsiaElectricity Needs of South Asia
14 ,03299285.3USA
3654519.7Ghana
4,8106643.2South Africa
-52.1Lesotho
3636218.7Sri Lanka
48152141.5Pakistan
721523.6Nepal
333-0.3Maldives
52580+1,032.4India
--2.0Bhutan
11820133.3 Bangladesh
kWhproduction per
capitain 2000
* Population% access to electricity
*Population in 2001(millions)
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Purdue International ModelsPurdue International Models• Purdue’s SUFG, State Utility Forecasting Group
was formed in 1985.• Reason for SUFG: Marble Hill Nuclear Station• SAPP legal entity 1995, Purdue 1997 – 2001• Purdue starts with WAPP in 1999• WAPP legal entity in 2000• SAPP comes under SADC, Southern African
Development Community• WAPP is part of the ECOWAS, Economic
Community of West African States• PPDG, Power Pool Development Group, is
the international component of SUFG
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Purdue Power Pool Development Purdue Power Pool Development Group (PPDG)Group (PPDG)
To promote and support international electricitypolicy analysis and to build regional electricity
planning models. International application of the Purdue State Utility Forecasting Group
(SUFG) models
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PPDG ActivitiesPPDG Activities1. Establishing international partnerships for
energy policy analysis2. Development of regional policy for electricity
trading and capacity expansion plans using Purdue models & expertise
3. Provision of training in electricity data collection and the use of electricity planning models, for technical & general users
4. Implement technology transfer to see the developed models being used in regions outside of the United States
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Benefits to International PartnersBenefits to International Partners
Strengthening of international cooperation & collaborative planning in the development of regional electricity marketsCost minimization plans through improved trading arrangements & strategic capacity expansionsDetermination of the costs and benefits from improved reliability in electricity supply systemsTransparent & comprehensive regional electricity data management
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Purdue & Regional ModelingPurdue & Regional Modeling
IndianaIndianaMidMid--West, USA, ECARWest, USA, ECAR--MAINMAINPacific Northwest, USAPacific Northwest, USASouthern African Power Pool (SAPP)Southern African Power Pool (SAPP)West Africa Power Pool (WAPP)West Africa Power Pool (WAPP)South Asia’s Pool FormationSouth Asia’s Pool Formation
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ECARECAR--MAIN Participating MAIN Participating MembersMembers
SPIL (Springfield Illinois City Water, Light and Power).CP (Consumers Energy)
SIPC (Southern Illinois Power Coop.)IPL (Indianapolis Power & Light Co.)CILC (Central Illinois Light Co.)
SIGE (Southern Indiana Gas & Electric Co.)
HE (Hoosier Rural Electric Coop.)IP (Illinois Power Co.)
CE (Commonwealth Edison Co.)
BREC (Big Rivers Electric Corp)OVEC (Ohio Valley Electric Corp.)FE (First Energy)
NIPSCO (Northern Indiana Public Service Co.)
EKPC (East Kentucky Power Coop.)
CG&E (Cincinnati Gas & Electric Co.) and PSI (PSI Energy Inc.)
LGEK (Louisville Gas & Electric + Kentucky Utilities Co.)
DP&L (Dayton Power & Light Co.)AMRN (Ameren)
EEI (Electric Energy Inc.)DLC (Duquesne Light Co.)AE (Alliant East) and AW (Alliant West)
DECO (Detroit Edison Co.)AP (Allegheny Power)AEP (American Electric Power)
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Network Topology of the Network Topology of the ECARECAR--MAIN ModelMAIN Model
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NERC RegionsNERC RegionsECAR, East Central Area Reliability Coordination AgreementERCOT, Electric Reliability Council of TexasFRCC, Florida Reliability Coordinating CouncilMAAC, Mid-Atlantic Area CouncilMAIN, Mid-America Interconnected NetworkMAPP, Mid-Continent Area Power PoolNPCC, Northeast Power Coordinating CouncilSERC, Southeastern Electric Reliability CouncilSPP, Southwest Power PoolWSCC, Western Systems Coordinating Council
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NERC RegionsNERC RegionsNorth American Electric Reliability CouncilNorth American Electric Reliability Council
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LongLong--Term Model Characteristics Term Model Characteristics & Applications& Applications
Cost MinimizingCost MinimizingEngineering & EconomicsEngineering & EconomicsGeneration & Transmission Generation & Transmission –– Existing and ProposedExisting and ProposedTrading of Energy & Power ReservesTrading of Energy & Power ReservesPolicy Priorities Policy Priorities –– Interdependence, Reliability, Sharing Interdependence, Reliability, Sharing Gains, PricingGains, PricingLongLong--Term Planning Term Planning –– 10 to 20 years10 to 20 yearsCosts of operation, fuels, investmentsCosts of operation, fuels, investmentsProvision of policy decision support toolsProvision of policy decision support toolsLarge regional model, user friendly interface, easy Large regional model, user friendly interface, easy technology transfertechnology transfer
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SAPP Transmission CapacitiesSAPP Transmission Capacities
6. Namibia (H, T)
(H) = Hydro Site
5B. N. Mozambique
5A. S. Mozambique (H)
4. Malawi
3. Lesotho
2. Botswana (T)
1. Angola (H)
12. Zimbabwe (H, T)
(T) = Thermal Site
11. Zambia (H)
10. DRC
9. Tanzania (H, T)
8. Swaziland
7B. S. South Africa
7A. N. South Africa (T)
2000
180
3001200
350014001400
650
550
320
130
850
2 5A
9
7B8
11
12
3
6
4
7A
5B
10
1
700 1200
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SAPP Background & ModelingSAPP Background & Modeling12 National Utilities 12 National Utilities with Power Poolwith Power PoolCreated 1995Created 1995Purdue LongPurdue Long--Term Term Model CreatedModel CreatedDisplacement of Displacement of thermal generation thermal generation with hydropower with hydropower from the north.from the north.
SAPP Demonstration Total Costs(for 16 years is $11.474 Billion)
Total Optimal Variable Costs for the HorizonFuel 5.604O&M 0.923Water 0.419
Total $6.947bnTotal Optimal Expansion Costs for the Horizon
Thermal 2.651Hydro 1.187Transmission 0.690Unserved Energy 0.000
Total $4.527bnDemonstration results & not used for project evaluation
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SAPP Pool PlanSAPP Pool PlanSAPP ~ 1997 to 2000
SAPP ~ ST cost savings $100mper year; LT expansion plan, RSA pumped hydros, RSA refurbishments, DRC hydro& central spine.
2,000
3,726
500300
2,000
2,750
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43
972
= new generation capacity
= new transmission capacity
NH = new hydroSC = small coalPH = pumped hydroGC = combined cycleGT = gas turbineLC = large coal
CC-152GT-143
NH-557
NH-120
CC-1046NH-262
NH-360CC-485
LC-1372PH-3000CC-6277
NH-3500
GT-1320NH-572SC-1800GT-840
GT-235CC-3552
LC-5615SC-1590GT-1222
GT-343
CC-406
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2000 ~ 2016
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SAPP LeastSAPP Least--Cost Detailed Cost Detailed Expansion PlanExpansion Plan
Period 2001-2004: (a) Major (4490 MW) increase in transmission capacity of DRC/Taz/Zam/Zim/Bot/NSA “spine,” connect DRC/Ang;
(b) Build DRC Inga 3 (3500 MW), NSA Camden (950 MW), CT in Taz Period 2005-2008: (a) Minor (846 MW) increase in transmission capacity of spine; (b) Recommission NSA Grootvlei (1140 MW), Camden (570 MW), CT
(750 MW), build SSA pumped storage (3000 MW), Nam Epupa (360 MW), CT in Taz
Period 2009-2012: (a) Expand Zim/Moz transmission link; (b) Build hydro in Zam (940 MW), Zim (500 MW), NMoz (1240 MW),
Taz (268.5 MW), Mwi/Ang (90 MW), SSA (P$ 1000 MW); build SC in NSA (890 MW), CT in NSA (250 MW), NUC (1000 MW) in SSA
Period 2013-2016: (a) Minor (300 MW) increase in spine transmission capacity; (b) Build hydro in Ang (280 MW), Zam (240), Taz (220), Mwi (90), Zim
(200); build SC in Zim (1800), LC in NSA (3954), CC in Nam (750)
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SAPP & Trade PolicySAPP & Trade Policy Free Trade, MW
(AFP = 0%) Limited Trade MW
(AFP = 70%) Free Trade, MWh
(AFE = 0%) $13.10* billion
Base Case $13.66* billion
4.1% Limited Trade, MWh
(AFE = 70%) $14.67* billion
10.7% $14.81* billion
11.5%
All 12 countries in SAPP are shown with same All 12 countries in SAPP are shown with same trade policy comparing free trade with limited trade policy comparing free trade with limited trade (70% autonomous)trade (70% autonomous)11.5% cost savings with free trade, compared to 11.5% cost savings with free trade, compared to a total regional limited trade of 70%.a total regional limited trade of 70%.
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WAPP Background & Purdue WAPP Background & Purdue ModelingModeling
14 National Utilities within Power Pool (2000)Zone A & Zone B parallel development (2001)Prioritize new international transmission projectsRole of West African Gas Pipe Line, WAGPL Infrastructure developmentPolicy analysis trainingECOWAS data collection, training & management
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WAPP Transmission Expansions WAPP Transmission Expansions 20022002--20202020
Gbi – Guinea Bissau
Gui – Guinea
Gha – Ghana
Gam – Gambia
ICo – Cote D’Ivoire
BFa – Burkina Faso
Ben – Benin
27
10
150 289
9322
2697
12
20
200
224 785 985
15
1175
Tog – Togo
SLe – Sierra Leone
Sen – Senegal
Ngr – Niger
Nga – Nigeria
Mal – Mali
Lib – Liberia
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Vital New Power LinesVital New Power Lines Existing international lines 2001-2002
Proposed new lines by ECOWAS Master PlanProposed new lines by ECOWAS Data Set #4
West AfricaTransmission PlanRestricted& Free Trade
Zone BZone A
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WAPP Gains From Trade With WAPP Gains From Trade With Improved ReliabilityImproved Reliability
19.3%9990806020%16.5%9324794910%15.6%939479245%14.9%928879040%
Percentage Cost Savings With Free Trade
WAPP Total Cost & Independence ($ million)
WAPP Total Cost Free Trade ($ million)
Thermal & Hydro Reserve Margins
Cost of improved Reliability is relatively low (only Cost of improved Reliability is relatively low (only 2% increase with free trade)2% increase with free trade)Large cost savings of 14.9% to 19.3% from free Large cost savings of 14.9% to 19.3% from free trade, with alternative reserve margins.trade, with alternative reserve margins.
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South Asia Regional ModelSouth Asia Regional Model
Pakistan
Bangladesh
BhutanNepal
9
87
2000**
300*
200*
500**
800+
150*200*500**
450*500**
15
42
6
1000**
200*
1011Maldives
Sri Lanka
3
1 India Northern Region2 India Western Region3 India Southern Region4 India Eastern Region5 India North-Eastern
Region
* 220 kV line** HVDC line+ 400 kV line
Existing linePlanned line
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South Asia Existing GenerationSouth Asia Existing Generation
136,449TOTAL
62%37%petroleum
1,779Sri Lanka
12%86%45% nat.gas41% petrol
18,000Pakistan
87%13%347Nepal
-100%petroleum
25Maldives
22%74%53% coal
112,000India
99%-355Bhutan
6%94%68% nat.gas
3,600Bangladesh
Percentagehydropowergeneration
Percentage thermal generation
Total Generation Capacity
(MW)
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South Asia Critical ProjectsSouth Asia Critical Projects
2,50010 Year Development Plan with $1bn for generation & $1.5 for lines
Sri Lanka
83,000MW hydropower potentialNepal
-6,000MW to 20,000MW hydropower potentialBhutan
-Enmore LNG station 1,886MW & LNG import terminal
India5,000Hirma coal-fired station, 3,960MWIndia
Unification of the national power gridIndia
-150MW international transmission to IndiaBangladesh4,400Power System Master Plan, PSMPBangladesh
Capital cost($ millions)
Name of projectCountry
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Strategy For South Asia Strategy For South Asia Energy Infrastructure BuildingEnergy Infrastructure Building
Identify all the stakeholders: utilities, Identify all the stakeholders: utilities, governments, investors and customers.governments, investors and customers.Define key objectives for next five yearsDefine key objectives for next five yearsLegal Establishment of power poolLegal Establishment of power poolEstablishing working committeesEstablishing working committeesAgreement on policy building prioritiesAgreement on policy building prioritiesData collection and policy analysisData collection and policy analysis
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PPDG Model InterfacePPDG Model Interface
Technical Users:EngineersEconomists
General Users:Governmentplanners
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In SummaryIn Summary
Great economic gains can be made from Great economic gains can be made from improved regional energy infrastructuresimproved regional energy infrastructuresThe desire for regional integration and The desire for regional integration and international cooperation (e.g. early days international cooperation (e.g. early days of the EU steel industry)of the EU steel industry)International experience to be drawn uponInternational experience to be drawn upon