1. An LP Formulation for Inter-Island Trading of Regulation Services EPOC, September 2008 E Grant Read University of Canterbury and EGR Consulting Ltd

2. University of Canterbury EGR Consulting Ltd Disclaimer This presentation relates to a draft formulation that may be subject to revision The views expressed are solely those of the author, and not necessarily shared by Concept Consulting, the Electricity Commission, or the System Operator No opinion is expressed or implied as to whether this, or any other formulation, should be implemented in New Zealand.

3. University of Canterbury EGR Consulting Ltd Outline Ancillary service co- optimisation Why is regulation different? Issues to be accounted for Simplifying assumptions The mathematics of implementing regulation Potential gains from inter-island trading LP formulation for regulation trading

4. University of Canterbury EGR Consulting Ltd Ancillary service co-optimisation The New Zealand electricity market pioneered co- optimisation of energy and ancillary services Two contingency (raise) response services traded, separately, for each AC island system This was generalised in Australia Six contingency (raise/lower) response services in a multi- regional AC system Plus “frequency keeping” (or “regulation”) Plus (recently) limited modelling of constraints on HVDC link to Tasmania

5. University of Canterbury EGR Consulting Ltd Why is regulation different? Regulation (or “Frequency Keeping”) is: About continuous response to essentially symmetric fluctuations in the generation/load balance (maintaining constant frequency) Not about occasional response to large asymmetric contingencies (ie unit/link failure) Regulation is not coordinated by providers responding independently to a rapid frequency drop in an AC system If shared between several providers, it is coordinated by: u Calculating and apportioning the required adjustment, and u Communicating this via “Automatic Generation Control” (AGC) This calculated response can : Take account of requirements in each AC island sub-system Allow inter-island trading or sharing

6. University of Canterbury EGR Consulting Ltd Issues to be accounted for Participant offers Assumed to have the same form as for current ancillary services (other markets use a different form ) Unit freeboard capacity Providers must be able to swing production both up and down AGC range limits Units can only be controlled within limits of AGC equipment Ramp rate limits Providers must be able to swing production at an acceptable rate Joint ramping restrictions That rate may be limited by ramping for other purposes HVDC freeboard capacity Nett impact of two island swings can not breach constraints

7. University of Canterbury EGR Consulting Ltd Simplifying assumptions We will ignore: AGC implementation issues No group dispatch Intra-interval re-dispatch Ramping limits AGC range limits Losses We will assume: Simple HVDC limits A symmetric up/down regulation service Constant participation factors in each dispatch interval

8. University of Canterbury EGR Consulting Ltd Implementing Regulation PID f eedback control algorithm calculates aggregate island response requirement: Proportional to current frequency deviation, and/or Integral of recent frequency deviations, and/or Differential of frequency deviation Unit participation factors (PF) must allow for: Proportional sharing of regulation duties within each island Inter-island sharing of duties so as not to violate HVDC limits These do not appear directly in the LP formulation, but yield useful insights

9. University of Canterbury EGR Consulting Ltd Participation Factors Requirement for symmetric linear/proportional response is actually quite restrictive Response for each unit is a proportional share of aggregate island response, RESP i, given by: So nett increase in South-North transfer must be: And remember, this must be symmetric, irrespective of the direction of HVDC transfer for energy purposes.

10. University of Canterbury EGR Consulting Ltd MAX Down ZEROMAX Up MAX Down ZERO MAX Up SI Response Requirement NI Response Requirement HVDC swings North HVDC swings South Swing Implications of Island Requirements Response Requirements? MIN >> National total swing >>MAX

11. University of Canterbury EGR Consulting Ltd BIG QUESTION? Is inter-island trading of regulation supposed to deliver gains from: Regulation sharing, or Regulation transfer? They are both valuable, but They are not the same, and We can not use the same HVDC capacity for both

12. University of Canterbury EGR Consulting Ltd Base Case: No trading Aggregate response in each island equals aggregate requirement in that island: In other words: E ach island meets its own requirement There is no change to South-North transfer And the market must clear:.

13. University of Canterbury EGR Consulting Ltd Limiting Case: Sharing only With no nett transfer of regulation service, the market must still clear : But we can use HVDC swing capacity to share actual response This keeps HVDC swing to: ZERO when both island requirements move up/down together HReg when island requirements move in opposite directions

14. University of Canterbury EGR Consulting Ltd Limiting Case: Transfer only If nett transfer of regulation is allowed, ignoring benefits from sharing, the market can clear : If we use all the HVDC swing capacity, HReg, for (say) South to North regulation transfer, we get: In other words, there is no reciprocal sharing, but: SI meets all its own requirement, plus as much as possible of the NI requirement, given HVDC swing capacity NI ignores SI requirement, just meeting residual NI requirement

15. University of Canterbury EGR Consulting Ltd Trade-off The above formulae can be generalised to allow simultaneous sharing and transfer, but: u HReg must be allocated between transfer and sharing u HReg ≤ Hcap… the HVDC freeboard Gains may be made by using AGC to develop a competitive market within each island, but further: Transfer reduces market purchase costs by allowing purchase from the cheaper island, while Sharing brings operational benefits by reducing probability of extreme island responses...although this only reduces market purchase costs if island requirements are reduced to reflect this

16. University of Canterbury EGR Consulting Ltd NOTE None of this depends on the underlying direction of HVDC energy transfer So, at any time we may have (for example): Energy being traded from North to South, with Regulation being traded from South to North In real time, this means that: Regulation service will be delivered from South to North, By varying the fundamental North-South energy flow (In principle this could involve reversing HVDC flow direction, but we do not allow this because there is a “no-go” zone around zero HVDC flow)

17. HVDC limits: HReg feasible region HVDC energy flow HVDC freeboard (HCAP) (Limit imposed by possible upswing for regulation purposes) (Limit imposed by possible downswing for regulation purposes) (Absolute limit on acceptable up/downswing for regulation purposes) LP may set Hreg <Hcap to avoid counter-productive excess “sharing” (HReg)

18. SReq SReq +HCap SReq -HCap NI regulation purchase (NReg) NReqNReq +HCap NReq -HCap SN transfer limit (no sharing) NS transfer limit (no sharing) SI regulation purchase (SReg) Balance point (no transfer, only sharing) National requirement LP formulation for regulation trading (if sharing does not reduce requirements)

19. SReg SReq SReq + HCap SReq - HCap NRegNReqNReq + HCap NReq -HCap SN limit NS limit Balance line.. and if sharing does reduce requirements Balance point moves in to reflect gains from sharing spare swing capacity not used by trading

20. University of Canterbury EGR Consulting Ltd Conclusion This formulation should allow symmetrical inter-island trading of regulation service Constraints also developed to deal with ramping issues etc Some issues to be resolved wrt interaction with SPD ramp limits, 5 minute (re-) dispatch, HVDC state modelling, etc An issue arises as to whether “sharing” should reduce national requirements The optimal solution does not necessarily use all available HVDC swing capacity Implementation is only possible if some form of AGC is actually implemented The costs and benefits have not been quantified (by me)