Least Cost System Operation:

Economic Dispatch 1

Smith College, EGR 325

February 6, 2018 1

Overview
• Complex system time scale separation
• Microeconomics: Supply & Demand
– Market clearing price
– Marginal cost
• Least cost system operation
– Generator cost characteristics
– Heat Rate (efficiency measure)
• Constrained Optimization
2

1
 Complex System Analysis
• Divide the full system into sub-systems
• In power systems we can analyze...
– By analysis question
• Cost, policy objectives, environmental impacts...
– By system sector: generation, transmission,
distribution, customer...
– By geographic region
– By time scale
• Time scale separation of events
3

Time Scale Separation

1. Given the plants that are generating, decide
how to maintain the supply-demand balance
cycle to cycle à power flow analysis
2. Given the plants that are ready to generate
electricity, decide which plants to use to meet
expected demand today, the next hour, the
next 5 minutes
3. Given the plants that are built, decide which
plants to start for use tomorrow, next week,
next month… (not covering this semester)
4. Decide what to build (system planning) 4

2
 Generator Cost
Characteristics

To minimize total system generating costs

we must first develop equations to
represent the cost of generating power

Stack

Boiler Cooling
Tower
Thermal Turbine Generator

Condenser

Pump

Coal
feeder
Burner
Body of water
6

3
 Generator Cost Curves
• Generator costs are determined by fuel
costs and generator efficiency
– We typically fit a quadratic equation to
empirical data from the generator
• These costs are represented by four
graphs defining unit performance
1) input/output (I/O) curve
2) fuel-cost curve
3) heat-rate curve
4) unit generating cost curve, and incremental
cost curve 7

Input/Output Curve
• The I/O curve plots fuel input (in MBtu/hr)
versus net MW output.
Input Output Curve
4000

3500

3000
Fuel Rate (mmBtu/hr)

2500

2000

1500

1000

500

0
0 50 100 150 200 250 300 350 400
Pg (MW output) 8

4
 Fuel-cost Curve
• The fuel-cost curve is the I/O curve scaled
by fuel cost
Fuel Cost Curve

6000

5000

4000
Fuel Cost ($/hr)

3000

2000

1000

0
0 50 100 150 200 250 300 350 400
Pg (MW output) 9

An Efficiency Curve
• Efficiency = Output vs. Input
• Interpret this curve...
** Efficiency changes with output level **
MWh/m
mBtu

Most Efficient
generation level

10
Pgen

5
 The Heat Rate Curve
• Plots the average number of MBtu/MWhr of fuel
input per MW of output
– The inverse of the standard efficiency (output/input)
• Heat-rate curve is the I/O curve scaled by MW
* and is not constant *
Level for most efficient
unit operation
mmBtu/
MWh

11
Pgen

Heat Rates
• What is a heat rate?
– Is a large or a small value preferable?
– What are the units for a heat rate?
• Typical heat rate values
– Coal plant is 10 mmBtu/MWh
– Modern combustion turbine is 10 mmBtu/MWh
– Combined cycle plant is 7 to 8 mmBtu/MWh
– Older combustion turbine 15 mmBtu/MWh

12

6
Generator Quadratic Cost Curve
• … and the derivative of the cost curve,
which is the marginal, or incremental, cost
curve

Ci (PGi ) = α i + βi PGi + γ i PGi2 $/hr (fuel cost)

dCi (PGi )
MCi (PGi ) = = βi + 2γ i PGi $/MWh
dPGi

13

Generator Cost Curve

• Plots $/hr as a function of Pg output
– What are the units of each point on the graph?
4 Generator Cost Curve
x 10
2

1.8

1.6

1.4

1.2
Cost ($/hr)

0.8

0.6

0.4

0.2

0
0 50 100 150 200 250 300 350 400
Pg (MW output) 14

7
 Marginal Cost Curve
• Plots the $/MWh as a function of Pgen MW output
– What are the units of each point on the graph?
Marginal (Incremental) Cost Curve
20
Marginal (Incremental) Cost ($/MWh)

15

10

0
0 50 100 150 200 250 300 350 400
Pg (MW output)
15

Mathematical Formulation of Costs

• Typically curves can be approximated

using
– quadratic or cubic functions
– piecewise linear functions
• Building from the quadratic nature of HR,
we will use a quadratic cost equation

Ci ( PGi ) = a i + b i PGi + g i PGi2 $/hr

16

8
 System Operations

17

Regional Electricity Prices

• ISOne (New England)
– http://www.iso-ne.com/
– http://www.iso-ne.com/isoexpress/
• PJM (Pennsylvania-New Jersey-Maryland)
– http://www.pjm.com/markets-and-
operations/interregional-map.aspx

18

9
Power System Economic Operation
• The total capacity of generators operating is greater than
the load at any specific moment
• This allows for much flexibility in deciding which generators
to use to meet the load at any moment
Aug 25-31, 2000 California ISO Load
450
400
350
Demand (GW)

300
250
200
150
100
50
0
1 15 29 43 57 71 85 99 113 127 141 155 19
Hour of week

Economic Dispatch Discussion

• Formulating the objective
– What are our goals in operating the power
system to serve our customers?

• What does solving our (to be developed)

set of equations help us to decide?

21

10
Economic Dispatch Formulation
• Formulating the objective
– How do we represent our objective
mathematically?

– What mathematical tool do we use to obtain

this objective?

22

Economic Dispatch Formulation

• We need to understand
– How to represent system generating costs
mathematically
• Costs of operating (dispatching) generators
– How to find the minimum system cost given
• Generator costs and
• System constraints
– Such as: total generation must equal total demand
– Constrained optimization via linear
programming
23

11
 Example Supply Curve – Costs of
Different Generating Technologies

24

Categories for Generators

Diurnal Load Shape
450 Peak Load
400
350
Demand (GW)

300 Intermediate
250
200
150
100 Baseload
50
0
1 3 5 7 9 11 13 15 17 19 21 23
Hour of Day 25

12
 Constrained Optimization

26

Linear Programming Definition

• Optimization is used to find the “best” value
– “Best” defined by us, the analysts and
designers
• Constrained optimization
– Minimize/maximize an objective, subject to
certain constraints
• Linear programming
– Linear constraints
– Some binding, some non-binding
27

13
 Formulating the
Linear Programming Problem
• Objective function
– Decision variables, what you need to decide
such as how much pizza to buy
• Constraints
– Bounds (limits) on the variables;
• Pizza parlor capacity
• Standard form
– min f (x)
– s.t. Ax = b
xmin <= x <= xmax 28

Formulating the
Linear Programming Problem
• For power systems:
minCT = ΣCi (PGi )
s.t. Σ(PGi ) = Pdemand
PGi _min ≤ PGi ≤ PGi _max

• Our “decision variables” are ______?

29

14
 To Solve:
Formulate the “Lagrangian”
• Rewrite the constrained optimization
problem as an unconstrained optimization
problem
– Then we can use the simple derivative
(unconstrained optimization) to solve
– Need to introduce a new variable – the
“Lagrange multiplier” lambda, λ
• The task is to interpret the results correctly
30

Formulate the ED Problem

Using the Lagrangian
min CT = ΣCi(PGi)
s.t. Σ(PGi) = PL
PGi min <= PGi <= PGi max

Then L = ?

L = CT - λ ( ΣPGi - PL )
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15
 Summary
• Introduce ‘time scale separation’
• Examine the mathematical origin for
generator costs
– Define heat rate
• Formulate the economic dispatch problem
conceptually
• Develop mathematical formulation of the
economic dispatch problem
32

Energy Conversions
• For reference
- 1 Btu (British thermal unit) = 1054 J
- 1 MBtu = 1x106 Btu
- 1 MBtu = 0.29 MWh
- Conversion factor of 0.2928MWh/MBtu

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