EE 369

POWER SYSTEM ANALYSIS Lecture 17

Optimal Power Flow, LMPs Tom Overbye and Ross Baldick

Announcements
Read Chapter 7. Homework 11 is 12.20, 12.21, 12.25, 12.27, 7.1, 7.2, 7.3, 7.4, 7.5; due Thursday, December 6.

Electricity Markets
Over last ten years electricity markets have moved from bilateral contracts between utilities to also include spot markets (day ahead and real-time). OPF is used as basis for real-time pricing in major US electricity markets such as MISO, PJM, CA, and ERCOT (from December 2010).

 Electricity (MWh) is now being treated as a commodity (like corn, coffee, natural gas) with the size of the market transmission system dependent. Tools of commodity trading have been widely adopted (options, forwards, hedges, swaps).

Electricity Markets

Electricity Futures Example

Source: Wall Street Journal Online, 10/30/08

Ideal Power Market

Ideal power market is analogous to a lake. Generators supply energy to lake and loads remove energy. Ideal power market has no transmission constraints Single marginal cost associated with enforcing constraint that supply = demand
buy from the least cost unit that is not at a limit this price is the marginal cost.

This solution is identical to the economic dispatch problem solution.

Two Bus ED Example

Total Hourly Cost : 8459 $/hr Area Lambda : 13.02

Bus A

Bus B

300.0 MW 199.6 MW AGC ON 400.4 MW AGC ON

300.0 MW

Market Marginal (Incremental) Cost

Below are some graphs associated with this two bus system. The graph on left shows the marginal cost for each of the generators. The graph on the right shows the system supply curve, assuming the system is optimally dispatched.

16.00

16.00

15.00

15.00

14.00

14.00

13.00

13.00

12.00 0 175 350 525 Generator Power (MW) 700

12.00 0 350 700 1050 Total Area Generation (MW) 1400

Current generator operating point

Real Power Markets

Different operating regions impose constraints may limit ability to achieve economic dispatch globally. Transmission system imposes constraints on the market:
Marginal costs differ at different buses.

Optimal dispatch solution requires solution by an optimal power flow Charging for energy based on marginal costs at different buses is called locational marginal pricing (LMP) or nodal pricing.

Pricing Electricity
LMP indicates the additional cost to supply an additional amount of electricity to bus. Some electric markets price wholesale energy at LMP:
ERCOT began this in December 2010.

In there were no transmission limitations then the LMPs would be the same at all buses:
Equal to value of lambda from economic dispatch.

Transmission constraints result in differing LMPs at buses. Determination of LMPs requires the solution of an Optimal Power Flow (OPF).
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Optimal Power Flow (OPF)

OPF functionally combines the power flow with economic dispatch Minimize cost function, such as operating cost, taking into account realistic equality and inequality constraints Equality constraints:
bus real and reactive power balance generator voltage setpoints area MW interchange
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OPF, contd
Inequality constraints:
transmission line/transformer/interface flow limits generator MW limits generator reactive power capability curves bus voltage magnitudes (not yet implemented in Simulator OPF)

Available Controls:
generator MW outputs transformer taps and phase angles
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OPF Solution Methods

Non-linear approach using Newtons method:
handles marginal losses well, but is relatively slow and has problems determining binding constraints

Linear Programming (LP):

fast and efficient in determining binding constraints, but can have difficulty with marginal losses. used in PowerWorld Simulator

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LP OPF Solution Method

Solution iterates between:
solving a full ac power flow solution
enforces real/reactive power balance at each bus enforces generator reactive limits system controls are assumed fixed takes into account non-linearities

solving an LP
changes system controls to enforce linearized constraints while minimizing cost

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Two Bus with Unconstrained Line

With no overloads the OPF matches the economic dispatch
Bus A Total Hourly Cost : 8459 $/hr Area Lambda : 13.01

Transmission line is not overloaded

13.01 $/MWh

Bus B

13.01 $/MWh

300.0 MW 197.0 MW AGC ON 403.0 MW AGC ON

300.0 MW

Marginal cost of supplying power to each bus (locational marginal costs) This would be price paid by load and paid to the generators.

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Two Bus with Constrained Line

Total Hourly Cost : 9513 $/hr Area Lambda : 13.26

Bus A

13.43 $/MWh

Bus B

13.08 $/MWh

380.0 MW 260.9 MW AGC ON 419.1 MW AGC ON

300.0 MW

With the line loaded to its limit, additional load at Bus A must be supplied locally, causing the marginal costs to diverge. Similarly, prices paid by load and paid to generators will differ bus by bus.
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Three Bus (B3) Example

Consider a three bus case (bus 1 is system slack), with all buses connected through 0.1 pu reactance lines, each with a 100 MVA limit. Let the generator marginal costs be:
Bus 1: 10 $ / MWhr; Range = 0 to 400 MW, Bus 2: 12 $ / MWhr; Range = 0 to 400 MW, Bus 3: 20 $ / MWhr; Range = 0 to 400 MW,

Assume a single 180 MW load at bus 2.

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B3 with Line Limits NOT Enforced

Bus 2
60 MW 60 MW

Bus 1 10.00 $/MWh

0.0 MW

10.00 $/MWh
120 MW 120%

180.0 MW

0 MW
60 MW

Total Cost 60 MW 1800 $/hr

120%

120 MW

Bus 3

10.00 $/MWh
180 MW

0 MW

Line from Bus 1 to Bus 3 is overloaded; all buses have same marginal cost (but not allowed to dispatch to overload 18 line!)

B3 with Line Limits Enforced

Bus 2
20 MW 20 MW

Bus 1 10.00 $/MWh

60.0 MW 12.00 $/MWh

100 MW 100%

120.0 MW

0 MW
80 MW

Total Cost 80 MW 1920 $/hr

100%

100 MW

Bus 3

14.00 $/MWh
180 MW

0 MW

LP OPF redispatches to remove violation. Bus marginal costs are now different. Prices will be different 19 at each bus.

Verify Bus 3 Marginal Cost

Bus 2
19 MW 19 MW

Bus 1 10.00 $/MWh

62.0 MW 12.00 $/MWh

100 MW
81%

100%

119.0 MW

0 MW
81 MW

Total Cost 81 MW 1934 $/hr

81%

100%

100 MW

Bus 3

14.00 $/MWh
181 MW

0 MW

One additional MW of load at bus 3 raised total cost by 14 $/hr, as G2 went up by 2 MW and G1 20 went down by 1MW.

Why is bus 3 LMP = $14 /MWh ?

All lines have equal impedance. Power flow in a simple network distributes inversely to impedance of path.
For bus 1 to supply 1 MW to bus 3, 2/3 MW would take direct path from 1 to 3, while 1/3 MW would loop around from 1 to 2 to 3. Likewise, for bus 2 to supply 1 MW to bus 3, 2/3MW would go from 2 to 3, while 1/3 MW would go from 2 to 1to 3.
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Why is bus 3 LMP $ 14 / MWh, contd

With the line from 1 to 3 limited, no additional power flows are allowed on it. To supply 1 more MW to bus 3 we need:
Extra production of 1MW: Pg1 + Pg2 = 1 MW No more flow on line 1 to 3: 2/3 Pg1 + 1/3 Pg2 = 0;

Solving requires we increase Pg2 by 2 MW and decrease Pg1 by 1 MW for a net increase of $14/h for the 1 MW increase. That is, the marginal cost of delivering power to bus 3 is $14/MWh.

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Both lines into Bus 3 Congested

Bus 2
0 MW 0 MW

Bus 1 10.00 $/MWh

100.0 MW12.00 $/MWh

100 MW 100% 100%

100.0 MW

0 MW
100 MW

Total Cost 100 MW 2280 $/hr

100%

100%

100 MW

Bus 3

20.00 $/MWh
204 MW

4 MW

For bus 3 loads above 200 MW, the load must be supplied locally. Then what if the bus 3 generator breaker opens?
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Typical Electricity Markets

Electricity markets trade various commodities, with MWh being the most important. A typical market has two settlement periods: day ahead and real-time:
Day Ahead: Generators (and possibly loads) submit offers for the next day (offer roughly represents marginal costs); OPF is used to determine who gets dispatched based upon forecasted conditions. Results are financially binding: either generate or pay for someone else. Real-time: Modifies the conditions from the day ahead market based upon real-time conditions. 24

Payment
Generators are not paid their offer, rather they are paid the LMP at their bus, while the loads pay the LMP:
In most systems, loads are charged based on a zonal weighted average of LMPs.

At the residential/small commercial level the LMP costs are usually not passed on directly to the end consumer. Rather, these consumers typically pay a fixed rate that reflects time average of LMPs. LMPs differ across the system due to transmission system congestion.
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LMPs at 8:55 AM on one day in Midwest.

Source: www.midwestmarket.org
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LMPs at 9:30 AM on same day

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MISO LMP Contours 10/30/08

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Limiting Carbon Dioxide Emissions

There is growing concern about the need to

limit carbon dioxide emissions. The two main approaches are 1) a carbon tax, or 2) a cap-and-trade system (emissions trading)

The tax approach involves setting a price and

emitter of CO2 pays based upon how much CO2 is emitted. A cap-and-trade system limits emissions by requiring permits (allowances) to emit CO2. The government sets the number of allowances, allocates them initially, and then private markets set their prices and allow trade.
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