Alvarado Naruc Reliability

Power Systems Engineering
Research Center (PSERC )
An NSF Industry / University

Cooperative Research Center
PSERC
1
Mission
PSERC
Universities working with industry and

government to find innovative
solutions to challenges facing a
restructured electric power industry.
Multi-disciplinary (engineering,
economics, operations research, etc.)
Multi-university
Collaborative
Research and education activities
PSERC Universities
PSERC
Cornell University (lead university)

Arizona State University
University of California at Berkeley
Carnegie Mellon University
Colorado School of Mines
Georgia Institute of Technology
The University Of Illinois at Urbana
Iowa State University
Texas A&M University
Washington State University
University of Wisconsin-Madison
3
Research Program
PSERC
Three research stems

Markets
Transmission and distribution technologies
Systems
Leveraged research (such as Consortium

for Electric Reliability Technology
Solutions)
Public documents: www.pserc.wisc.edu
Electric Service Reliability
Fernando L. Alvarado
Professor, University of Wisconsin
Invited Presentation
43rd NARUC Program
East Lansing, Michigan, August 15, 2001
Outline
PSERC
Traditional reliability concepts

LOLP
n-1 security
Reserve margins
Reliability in a market context

The Value Of Lost Load (VOLL)
Some market power issues

6
Traditional reliability concepts

Loss of load probability (LOLP)
Expected Demand Not Served (EDNS)
n-1 security
Reserve margins
Electric service reliability
PSERC
End-user perspective:
Any involuntary loss of power is a

reliability event
Bulk system perspective:
Any system condition leading to loss of

load is a reliability event
Only those leading to widespread or extended

outages are considered true reliability events
The outage of a component is not an event
8
Reliability Time Frames
PSERC
The planning time frame

The operations time frame
Reliability in this timeframe is sometimes
called security
In this talk we will emphasize the
operations time frame
Loss of load probability
PSERC
A planning concept
Based on random outage of generators,
what is the probability that the available
generators will be insufficient to meet
the anticipated load
Measured in frequency of expected outages
EDNS extends the concept to

consider energy not served
10
The n-1 security criterion
PSERC
The outage of any single piece of

equipment shall not result in an
uncontrolled loss of load
A pretty universal and fundamental way
of operating the system
Cost in not in the equation
Sometimes n-2 and n-3 criteria are

used
11
Applying the n-1 criterion
PSERC
Outage of any generator does not

cause overloads or other problems
n-1 criterion used to establish reserve

requirements
Outage of any line or transformer

should not cause any other overloads
If a potential problem exists, system is

redispatched for security reasons
(either via CED, via TLR, or via prices)
12
Why do systems fail?
PSERC
Cascading overloads
A simple line or transformer outage is

not enough except in radial situations
Most distribution systems are radial
Loss of system stability

Transient or dynamic
Voltage collapse
Insufficiency of generation
13
Reserves
PSERC
The loss of any generator shall not

cause an uncontrolled loss of load
The area control error (ACE) must
be brought under control
NERC has well-defined rules for this
At present the rules are voluntary
14
What is the ACE?
PSERC
To facilitate control, the power

system is divided into control areas
All exports and imports are monitored

Every area balances its energy to attain
the desired exports or imports
It also contributes to frequency control
The ACE is the deviation between the

intended frequency+exports and the
actual values
15
More on reserves
PSERC
Reserves may have to be locational

They must consider time of response
Reserves are often classified this way
Sustainability attribute of reserves

has been underconsidered to date
The cost of procuring reserves can be
quite important
Reactive reserves are important
16
Reserve margins
PSERC
How far are we from a failure under

normal conditions
And how about under contingency
conditions
A contingency is the loss of a component
You must also ask in what direction
How far is the nearest gas station is different

from how far is the next gas station
Often the direction is total system load
17
Choosing reserve margins
PSERC
Depends on largest credible event

Sometimes the probability of a
triggered event is factored in
Play it more conservative during bad
weather
Margins often expressed in terms of

size of largest generator or loss of
biggest import
18
Temporal classification
PSERC
Spinning reserves
Fast-responding, usually instantaneously
Supplemental reserves
You can bring resources on-line quickly
Backup reserves
They can be brought on line after some
time
19
Reliability in a market context

Reliability event occurs when demand
exceeds supply
The supply and demand curves do not
intersect!
10
What is reliability anyway? PSERC

The CAISO just disconnected you as
a result of insufficient reserves
This is an example of a reliability event
You had vountarily signed up for an

interruptible program and got cut off
This is not a reliability event
21
Economics 101
PSERC
Price
Demand function
(value of electricity
to customers)
Consumer
surplus
Total consumer
surplus (area)
Price
Equilibrium
Quantity
11
Economics 101
Price
PSERC
Production function
(cost of electricity
to producers)
Price
Producer
surplus
Equilibrium
Total producer
surplus (area)
Quantity
Economics 102
Price
PSERC
Total consumer
surplus (area)
Price
Equilibrium
Total producer
surplus (area)
Quantity
12
Some realities
PSERC
Demand function is closer to vertical

Supply function tends to have steps
Supply function does not extend to
infinity
25
A market problem
Price
PSERC
Price
No Equilibrium?
Quantity
13
A market failure
Price
PSERC
Inelastic
demand
No Equilibrium
Quantity
Reliability & market failure PSERC

Market failure Reliability event
Reliability event Market failure?
Certain reliability events are not the
result of market failure
There must have been a market in the first
place
28
14
Assumptions
PSERC
Exactly two technologies

Each technology has a known price
No market power
Inelastic demand
29
Deterministic Demand and Supply, low demand case
Available supply
Quantity (power)
Demand (inelastic)
Price
Security Margin
Maximum
available
power
Clearing
price
15
Deterministic Demand and Supply, high demand case
Available supply
Demand (inelastic)
Price
Clearing
price
Maximum
available
power
Quantity (power)
Unfeasible case, no demand elasticity
No intersection
16
The effect of demand elasticity

Demand elasticity makes case feasible
Greater elasticity does not help

much more (price is still high)
Interruptible demand
Interruptible demand also helps
17
Probabilistic Demand, high demand case
Probability of low prices
Outage
probability
Generator 6
Generator 5
Generator 4
Generator 3
Generator 2
Generator 1
The piece-wise nature of the supply curve
18
The effect of a generator outage
Outaged
generator
Old
supply
limit
New
supply
limit
Effect of demand uncertainty

and generator outage
Probability
p2
Probability p1
n-1 secure
insecure
Outage probability is p1*p2
19
Generator 1A
Generator 2A
Generator 5A
Generator 6A
System A
Generator 4A
Low price
Secure
System A
Low price
n-1 secure
Generator 3A
Generator 1B
Generator 4B
Generator 5B
System B
Generator 3B
High price
n-1 insecure
High price
n-1 secure
System B
Generator 2B
20
Flow
System A
System B
Low price
n-1 secure
Low price
n-1 secure
Temptation: construct a composite supply curve

unnecessary
Low price
n-1 secure
21
Situation with line transmission limits
System A
Max
flow
Flow
System B
Low price
n-1 insecure
Low price
n-1 secure
Outaged
generator
Normal conditions
Max
flow
Unable
to clear
Use of distributed reserves
System A
Low price
n-1 secure
Max
flow
Flow
System B
Low price
n-1 secure
22
Reality
Many flowgates
Networked sysyem
Demand can be elastic
Time delays important
Generators have fixed
(investment) costs and
restrictions
Load is uncertain
PSERC
Transmission outages
exacerbate problems
If one firm dominates
a technology, market
power occurs (next)
If one firm dominates
a location, market
power results
45
The effect of congestion

Price
PSERC
Total consumer
surplus (area)
Equilibrium
point
Equilibrium
region
Total producer
surplus (area)
Price
Congestion
level
Surplus
net loss
Quantity
23
Who gets what

PSERC
Price
Producer
surplus
loss
Producer
surplus
gain
Price
Congestion
level
Quantity
Who gets what, part II

Price
Only under monopsony or regulated conditions PSERC
Price
Consumer
surplus gain
Congestion
level
Quantity
24
Price
The incentive to congest

Producer
surplus
gain
Producer
surplus
loss
PSERC
Gain: p*C
Loss: C*p
Price
p
Congestion
level
Quantity
Equilibrium with congestion

Price
Gain: p*C
Loss: C*p
Price
p
Equilibrium when:
p*C = C*p, or
p/ C=p/C
Quantity
25
The effect of congestion
PSERC
Congestion creates gaming

opportunities
Producers have an incentive to congest

(Up to a point)
The only unambiguous way to

characterize the effect of congestion
is to look at net surplus loss
Translated: when we compute congestion

costs, we do not care who incurs them
Additional remarks
PSERC
Two-technology suppliers can lead to higher

than marginal prices as the knee of the
supply curve is approached
Larger number of suppliers reduces this
effect
Market power studies should consider
investment recovery issues
Transmission congestion makes matters
worse!!
52
26
Features of the example
PSERC
Only two areas (one flowgate)

Radial
Demand is inelastic
Time delays are not an issue
Generators have no startup/shutdown
costs or restrictions or minimum
power levels
53
Observations
PSERC
Demand elasticity is important

Locational aspects of reserves matter
LMP for reserves
Ramping rates matter

In deregulated markets only units explicitly
committed to reserves are available
In regulated markets and in PJM all units are
Reliability requires that we increase supply

Standby charges tend to reduce supply (Tim
Mount)
54
27
Reliability and price spikes*PSERC

What has happened in California?
Price caps have come down

Average prices have increased
Price volatility has decreased
There have been involuntary curtailments
(*) Some of this material comes from Tim Mount at Cornell

55
PJM daily average on-peak spot price and max load
$/MWh
MW
800.00
78000
Price
Maxload
600.00
70000
400.00
62000
200.00
54000
0.00
46000
-200.00
38000
-400.00
30000
-600.00
-800.00
4/97
22000
6/97
8/97 10/97 12/97 2/98
4/98
6/98
8/98 10/98 12/98 2/99
4/99
6/99
8/99 10/99 12/99 2/00
4/00
date
28
Assorted PJM offer curves
PJM Offer Curves at 5pm from April to August (last Tuesday)

Offer Price
1200
1000
800
600
400
200
0
0
April (4/27/99) : $29.4/MWh 28.2GW/h
10
20
10
20
10
20
Offer Price
1200
1000
800
600
400
200
0
0
50
60
70
30
40
50
60
70
30
40
50
60
70
50
60
70
50
60
70
July (7/27/99) : $935.0/MWh 49.2GW
10
20
30
40
August (8/24/99) : $33.7/MWh 38.5GW
Offer Price
1200
1000
800
600
400
200
0
40
June (6/29/99) : $59.5/MWh 48.1GW
Offer Price
1200
1000
800
600
400
200
0
30
May (5/25/99) : $25.9/MWh 30.3GW/h
Offer Price
1200
1000
800
600
400
200
0
10
20
30
40
29
Observations
PSERC
Price spikes have developed not so much

under high load conditions as under tight
reserve conditions
For suppliers that own more than one
technology, there are strong incentives to
withhold capacity
There is a strong connection between
reserves and reliability (and market power)
59
Market Power?
The ability to raise
prices significantly
above the efficient
economic equilibrium
Disclaimer: the slides

that follow are not
really a market power
study but rather they
represent a simplified
illustration of how
higher prices could
result as a result of
market concentration.
30
Market Power: Assumptions

There are exactly two technologies
Each technology has a fixed marginal price

availability of the expensive technology
Limited availability of the cheap technology
Cheap technology has fixed costs (investments) to recover
Demand is inelastic
All suppliers but a schedule all their cheap power
a owns P MW in n1 equal-sized generators
Supplier a can withhold one or more generators

Bidding above marginal cost is not allowed, withholding is
If generators bid marginal price,

the generators surplus is zero
Supplier a generator 1
Demand
Supplier a generator 2
Other suppliers
The piece-wise nature of the supply curve revisited
Clearing
price
31
Red generator decides to withhold one generator
Surplus for
red supplier
Surplus for
blue supplier
Clearing
price
Red supplier now

has large surplus
Withheld
generator
Of course blue supplier

has even LARGER surplus!
If margins are increased

Question: and how are the
expensive technology units
supposed to recover their
investment if they always
clear at their marginal cost?
Now it is not possible for red

supplier to withhold and gain
Answer: you may end

up with less capacity
than you thought
Raising prices
would require
collusion
Clearing
price
32
Probability p that
withholding will
result in surplus
Price
If demand is uncertain
P1
price 1
Quantity (power)
The expected surplus
gain is: p*(2-1)*P1
Since 1 is cheap units marginal

cost, there is no expected surplus loss
Additional observations
PSERC
If the margin to the knee is Pm, any

supplier with a total ownership above
Pm may profit from withholding
If more than one supplier meets this
conditions, chances are that someone will
withhold
66
33
Effect of granularity
Surplus is P*(2-1) for
demand above this level
With only one

generator, it is
impossible to
withhold and
benefit P
For two generators, surplus

is P*(2-1)/2 for demand
above this level
Effect of granularity, three generator case
Surplus is P*(2-1)/3 for

Surplus is 2P*(2-1)/3 for

34
With n=1, there is no surplus
Surplus
Effect of granularity
Surplus with n=2

Surplus with n=3
Surplus with n=4
Demand level
Surplus with n
Observations and assumptions

For worst case effect, assume n=
Assume withholding will occur

Withholding softens the supply curve
High cost periods needed for investment

recovery
Demand is probabilistic
Suggestion: market power occurs if expected
surplus far exceeds investment recovery
This is also a signal for system expansion
35
ers
10 suppli
On
lier
p
p
u
es
su
pp
lie
rs
3s
u pp
lier
s
Price
Effect of number of suppliers on supply curve
Demand
Effect of demand uncertainty on investment recovery
Price
Period during which

investment recovery
can take place
Withholding increases the period during

which surplus accrues but reduces the
amount that accrues
Demand
36
Price
The effect of demand uncertainty on investment recovery
Period during which

investment recovery
can take place
Demand
Numerical studies
PSERC
Demand is 60/70/80/90/95% of knee

for demand varies from 0 to 20%
Demand probability function is normal
Supplier has equal size units available
There are 3/6/10/15/
suppliers
We illustrate the investments that can be recovered
for each of the case combinations above according
to our earlier withholding assumptions
74
37
Investment recovery without market power ( suppliers)
Thousands per year per MW
250
99%
200
Demand level as a percentage

of available capacity
150
95%
100
90%
50
80%
0
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
Variance of demand (per unit)
suppliers, demand level as a parameter
Investment recovery (thousands per MW-year)
200
60%
70%
80%
90%
95%
180
160
140
120
Even for high

demand levels, some
demand variance
is essential for
cost recovery
100
80
60
40
20
0
0
10
12
14
16
18
20
Demand Variance (percent)
38
15 suppliers, demand level as a parameter

250
200
For high enough demand levels

cost recovery is possible
even without demand
variance
150
60%
70%
80%
90%
95%
100
50
0
0
10
12
14
16
18
20
18
20

300
250
For high demand levels

demand variance can become
irrelevant
200
150
60%
70%
80%
90%
95%
100
50
0
0
10
12
14
16
39

400
350
300
250
200
60%
70%
80%
90%
95%
For low demand levels it is

very difficult to recover
investments
150
100
50
0
0
10
12
14
16
18
20

450
400
350
300
For high demand levels, high variance

can even be slightly detrimental to profits
250
200
60%
70%
80%
90%
95%
150
100
50
0
0
10
12
14
16
18
20
40

450
400
350
60%
70%
80%
90%
95%
300
250
200
With three or less suppliers, it becomes feasible

at high variances to recover investments by
withholding at low demand
150
100
50
0
0
10
12
14
16
18
20
18
20
Demand level 60%, number of suppliers as a parameter

50
suppliers
15 suppliers
10 suppliers
6 suppliers
4 suppliers
3 suppliers
45
40
35
30
25
At low demand and low

variance it is impossible
to recover investments
20
15
10
0
0
10
12
14
16
41
Dem and lev e l 70% , num ber of suppliers as a param e ter

120
Fixed cost recovery (thousands per MW-year)
s upplie rs
15 s upplie rs
10 s upplie rs
6 s upplie rs
4 s upplie rs
3 s upplie rs
100
80
60
At higher demand with 3 suppliers

it is possible to recover
costs at low variance
40
20
0
0
10
12
14
16
18
20
De m and Variance (pe rce nt)
400
350
300
As demand increases, withholding becomes

profitable even when there are many suppliers
250
200
s upplie rs
15 s upplie rs
10 s upplie rs
6 s upplie rs
4 s upplie rs
3 s upplie rs
150
100
50
0
0
10
12
14
16
18
20
42
450
400
350
300
250
200
150
100
s upplie rs
Only in the case

of infinite suppliers is it
impossible to recover costs
50
0
0
10
12
14
15 s upplie rs
10 s upplie rs
6 s upplie rs
4 s upplie rs
3 s upplie rs
16
18
20
Comments on numerical results

The number of suppliers has a strong influence on
investment recovery
Below a certain number of suppliers, investment
recovery by withholding becomes easier
There are demand thresholds beyond which there

is a jump in the ability to recover investments
All studies have assumed that supplier adjusts
withholding after learning the demand
Demand variance affects reliability
It also influences the ability to recover investments
43
Final remarks
PSERC
Reliability not decoupled from economics

Tight reliability precursor to price spikes
The structure of two-technology suppliers

can lead to higher prices as the knee of
the supply curve is approached
More suppliers reduce this effect
Market power studies should consider

investment recovery, locational effects
Congestion, loop flows, voltage, frequency
are also important
87
Reliability
Reserves
Price spikes
44

Alvarado Naruc Reliability

Diunggah oleh

Informasi Dokumen

Deskripsi Asli:

Hak Cipta

Format Tersedia

Bagikan dokumen Ini

Bagikan atau Tanam Dokumen

Opsi Berbagi

Apakah menurut Anda dokumen ini bermanfaat?

Apakah konten ini tidak pantas?

Hak Cipta:

Format Tersedia

Alvarado Naruc Reliability

Diunggah oleh

Hak Cipta:

Format Tersedia

Power Systems Engineering

Research Center (PSERC )

An NSF Industry / University

Universities working with industry and

Cornell University (lead university)

Three research stems

Leveraged research (such as Consortium

Electric Service Reliability

Traditional reliability concepts

Reliability in a market context

Some market power issues

Traditional reliability concepts

Electric service reliability

Any involuntary loss of power is a

Bulk system perspective:

Any system condition leading to loss of

Only those leading to widespread or extended

Reliability Time Frames

The planning time frame

Loss of load probability

EDNS extends the concept to

The n-1 security criterion

The outage of any single piece of

Sometimes n-2 and n-3 criteria are

Applying the n-1 criterion

Outage of any generator does not

n-1 criterion used to establish reserve

Outage of any line or transformer

If a potential problem exists, system is

Why do systems fail?

A simple line or transformer outage is

Loss of system stability

The loss of any generator shall not

What is the ACE?

To facilitate control, the power

All exports and imports are monitored

The ACE is the deviation between the

Reserves may have to be locational

Sustainability attribute of reserves

How far are we from a failure under

A contingency is the loss of a component

You must also ask in what direction

How far is the nearest gas station is different

Choosing reserve margins

Depends on largest credible event

Margins often expressed in terms of

Reliability in a market context

What is reliability anyway? PSERC

You had vountarily signed up for an

Demand function is closer to vertical

Reliability & market failure PSERC

Exactly two technologies

Deterministic Demand and Supply, low demand case

Deterministic Demand and Supply, high demand case

Unfeasible case, no demand elasticity

The effect of demand elasticity

Greater elasticity does not help

Interruptible demand also helps

Probabilistic Demand, high demand case

Probability of low prices

The piece-wise nature of the supply curve

The effect of a generator outage

Effect of demand uncertainty