Economic Dispatch

EPE507
Power System Operation

Dr. Amer Al-Hinai

The Economic Dispatch Problem

Consider a system that consists of N thermalgenerating units serving an aggregated electrical
load, Pload

Power System Operation

The Economic Dispatch Problem

Input to each unit: cost rate of fuel consumed, Fi

Output of each unit: electrical power generated, Pi
Total cost rate, FT, is the sum of the individual unit costs
Essential constraint: the sum of the output powers must
equal the load demand
The problem is to minimize FT
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Retail Electricity Prices

There are many fixed and variable costs
associated with power systems, which ultimately
contribute to determining retail electricity prices.
The major variable operating cost is associated
with generation, primarily due to fuel costs:
Roughly half of retail costs.

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Power System Economic Operation

Different generation technologies vary in the:
capital costs necessary to build the generator
fuel costs to actually produce electric power

For example:
nuclear and hydro have high capital costs and low
operating costs.
Natural gas generators have low capital costs, and
higher operating costs.

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Power System Economic Operation

Fuel cost to generate a MWh can vary widely
from technology to technology.
For some types of units, such as hydro, fuel
costs are zero but the limit on total available
water gives it an implicit value.
For thermal units
characterize costs.

it

is

much

easier

to

We will focus on minimizing the variable

operating costs (primarily fuel costs) to meet
demand.
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Electric Fuel Prices

Source: EIA Electric Power Annual, 2006 (October 2007)

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Natural Gas Prices: 1990s to 2008

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Coal Prices: 2005 to 2008

There are four main
types of coal:
Bituminous
sub-bituminous
lignite
anthracite.
Heat values range
from a low of
8Mbtu per ton to a
high of 31 Mbtu
per ton.

For Illinois coal

price per Mbtu is
about 4/Mbtu.
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Power System Economic Operation

Power system loads are cyclical.
Therefore the installed generation capacity is
usually much greater than the current load.
This means that there are typically many ways
we could meet the current load.
Since different states have different mixes of
generation, we will consider how generally to
minimize the variable operating costs given an
arbitrary, specified portfolio of generators.
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US Generation Mix (Energy)

circa 2006-2009

Gen Type
Coal
Nuclear
Hydro
Gas
Petroleum
Other Renewable

US %
48
19
6
21
1
3

Illinois %
California %
48
1
48
15
0.1
22
3
50
0.1
1
0.4
12 (14 in 1990)

Texas %
36
15
2
40

Indiana is 94% coal, while Oregon is 71% hydro,

Washington State is 76% hydro. Canada is about 60% hydro,
France is also 80% nuclear, China is about 80% coal

Source: http://www.eia.doe.gov and Public Utility Commission of Texas

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Power System Economic Operation

The two main types of generating units are thermal and
hydro, with wind rapidly growing.
For hydro the fuel (water) is free but there may be many
constraints on operation:
fixed amounts of water available,
reservoir levels must be managed and coordinated,

downstream flow rates for fish and navigation.

Hydro optimization is typically longer term (many months

or years).

We will concentrate on thermal units, looking at shortterm optimization.

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Generator types
Traditionally utilities have had three broad
groups of generators:
Baseload units: large coal/nuclear; almost always on
at max.
Midload, intermediate, or cycling units: smaller
coal or gas that cycle on/off daily or weekly.
Peaker units: combustion turbines used only for
several hours.

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Block Diagram of Thermal Unit

To optimize generation costs we need to develop cost

relationships between net power out and operating
costs.
Between 2-10% of power is used within the generating
plant; this is known as the auxiliary power.
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Generator Cost Curves

Generator costs are typically represented by one
or other of the following four curves:

input/output (I/O) curve

fuel-cost curve
heat-rate curve
incremental cost curve

For reference
- 1 Btu (British thermal unit) = 1054 J
- 1 MBtu = 1x106 Btu
- 1 MBtu = 0.29 MWh
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I/O Curve
The IO curve plots fuel input (in MBtu/hr) versus
net MW output.

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Fuel-cost Curve
The fuel-cost curve is the I/O curve multiplied by fuel
cost.
A typical cost for coal is $ 1.70/MBtu.

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Heat-rate Curve
Plots the average number of MBtu/hr of fuel input
needed per MW of output.
Heat-rate curve is the I/O curve divided by MW.

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Incremental (Marginal) cost Curve

Plots the incremental $/MWh as a function of MW.
Found by differentiating the cost curve.

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Mathematical Formulation of Costs

Generator cost curves are usually not smooth.
However the curves can usually be adequately
approximated
using
piece-wise
smooth,
functions.
Two approximations predominate:

quadratic or cubic functions

piecewise linear functions

We'll assume a quadratic approximation:

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The Economic Dispatch Problem

H: Btu per hour heat input
to the unit (Btu/h)
F: Fuel cost times H is
(/h) input to the unit for
fuel
The per hour operating
cost rate of a unit will
include prorated operation
and maintenance costs.
The labor cost for the
operating crew is included
as part of the operation
cost.

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The Economic Dispatch Problem

The mathematical statement of the problem is a
constrained optimization with the following functions:
objective function:
equality constraint:

FT Fi Pi
i 1

PLoad Pi 0
i 1

Note that any transmission losses are neglected and any operating
limits are not explicitly stated when formulating this problem

Problem may be solved using the Lagrange function

N

FT Fi Pi . PLoad Pi
i 1
i 1

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The Economic Dispatch Problem

The Lagrange function establishes the necessary
conditions for finding an extreme of an objective function
with constraints
Taking the first derivatives of the Lagrange function with
respect to the independent variables allows us to find the
extreme value when the derivatives are set to zero
There are (NF + N) derivatives, one for each independent variable
and one for each equality constraint
The derivatives of the Lagrange function with respect to the
Lagrange multiplier merely gives back the constraint equation
The NF partial derivatives result in

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L Fi Pi

0
Pi
Pi
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The Economic Dispatch Problem

Example # 1
Determine the economic operating point for the
three generating units when delivering a total of
850 MW
Input-output curves:
Unit # 1: coal-fired steam unit: H1 = 510 + 7.20P1 + 0.00142P12 MBtu/h

Unit # 2: oil-fired steam unit : H2 = 310 + 7.85P2 + 0.00194P22 MBtu/h

Unit # 3: oil-fired steam unit : H3 = 78 + 7.97P3 + 0.00482P32 MBtu/h

Fuel costs
coal: $ 3.30 / MBtu
oil: $ 3.00 / MBtu
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ED: Inequality Constraints

In addition to the cost function and the equality constraint
each generation unit must satisfy two inequalities
The power output must be greater than or equal to the
minimum power permitted:

Pi Pi , min
Minimum heat generation for stable fuel burning and temperature

The power output must be less than or equal to the

maximum power permitted:

Pi Pi , max
Maximum shaft torque without permanent deformation
Maximum stator currents without overheating the conductor
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ED: Inequality Constraints

Then the necessary conditions are expanded slightly

dFi
Pi : Pi, min Pi Pi, max
dPi
dFi
Pi Pi, min
dPi
dFi
Pi Pi, max
dPi

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ED: Inequality Constraints

Example # 2
Reconsider the example # 1 with the
following generator limits and the price of
coal decreased to $2.70 / MBtu
Generator limits:
Unit # 1: 150 P1 600 MW
Unit # 2: 100 P2 400 MW

Unit # 3: 50 P3 200 MW

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ED: Network Losses

Consider a similar system, which now has a
transmission network that connects the generating
units to the load

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ED: Network Losses

The economic dispatch problem is slightly more
complicated
The constraint equation must include the
network losses, Ploss
The objective function, FT is the same as before
The constraint equation must be expanded as:
N

PLoad PLoos Pi 0
i 1

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ED: Network Losses

The same math procedure is followed to establish the
necessary conditions for a minimum-cost operating
solution
Lagrange function and its derivatives w.r.t. the input power:
N

FT Fi Pi . PLoad PLoos Pi
i 1
i 1

dPloos
dPloos
d dFi
dFi
0

dPi dPi
dPi
dPi
dPi

The transmission network loss is a function of the impedances and

the currents flowing in the network
For convenience, the currents may be considered functions of the
input and load powers

It is more difficult to solve this set of equations

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ED: Iterative Method

step 1 pick starting values for
Pi that sum to the load
step 2 calculate Ploss/Pi and
the total losses Ploss
step 3 calculate that causes
Pi to sum to Pload & Ploss
step 4 compare Pi of step 3
to the values used in step 2; if
there is significant change to
any value, go back to step 2,
otherwise, the procedure is
done
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Pick Pi,
N

P P
i 1

load

Calculate
Ploss
Pi

Calculate total
losses Ploss
Pi = Pinew
Solve for
and Pinew
No

is

Pinew - Pi
?
Yes

Done
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ED: Network Losses

Example # 3
Repeat the first example, but include a
simplified loss expression for the transmission
network
Ploss = 0.00003 P12 + 0.00009 P22 + 0.00012 P32 MW

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