Class 1 Economic systems for electric power planning Professors Jim McCalley and Leigh Tesfatsion

WEBSITES Dr. McCalley’s: Dr. Tesfatsion’s: 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? Deregulation Privatization Vertical disaggregation Functional unbundling Introduced markets Brought competition

When did this happen? Well, sort of, actually, it all started much earlier…

What was it before? A monopolistic, and regulated, industry  In 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 And this drove all thinking in the electric industry from 1900 until the early 1960’s. And then what happened?

Three things 1.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 things 2.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 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 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 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

? GGG G G G GG Transmission and System Operator Vertically Integrated Utility

? G G G G G G G G Transmission Operator Independent System Operator Transmission Operator Transmission Operator Today GGG G G G GG 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.