JMEE7311

Power Systems Operation

and Management
First lecture
Syllabus
Introduction
 Organization of the electricity supply industry
Dr. Nassim Iqteit
16-2-2019 1
Syllabus Course Description and Outline
o Introduction
o Basic economics concepts,
o Markets for electrical energy,
o Operation of conventional power systems: economic load dispatch optimal power flow, unit
commitments
o Participating in markets for electrical energy,
o System security and ancillary services,
o Transmission networks and electricity markets,
o Management of transmission congestions
o Investing in generation, and transmission
o Deregulation of power systems,
o Operation of competitive power systems: role of ISO, pool structures and operation, unit
commitments
o Mathematical methods and tools applied to power system operation,
o Characteristics of power generation units,
o Reactive power dispatch and allocation,
o Optimal power flow using intelligence algorithms.
o Introduction to State Estimation in Power Systems 2
 Textbook:
 Wood, Allen & Wollenburg, B.F. ‘Power Generation, Operation and Control’
John Wiley, third edition 2014.
Steven Stoft, Power System Economics:designing markets for electricity, Wily, 2002.

 References
1. Vaahedi, Practical Power System Operation. John Wiley & Sons, 2014.
2. Kankar Bhattacharya, Math Bollen and Jaap E. Daalder, "Operation of
Restructured Power System", Kluwer's Power Series, ISBN 0-7923-7397-9,
2001
3. Robert pindyck and Daniel Rubenfeld, microeconomics, 8th edition, Pearson, 2013.
4. Roy Billinton and Ronald N. Allan, Reliability evaluation of power systems,.
New York, Plenum Press, 1996. 2nd edition.
5. Hisham Khatib, Economic Evaluation of Projects in the Electricity Supply
Industry, the institution of engineering and technology, London, 2014.
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 Grading Policy

Home Exam 20 %
Assignment 15 %
Term Paper 25%
Final Exam 40 %
 Term Paper:
o The term paper is supposed to simulate, analysis or solve problems in the electrical power system or reproducing the
results of a published paper.
o The details of the term-paper are to be elaborated by the instructor at a subsequent stage during the semester.
o Each student will be asked to select a topic different than the other colleagues.
o Each student must submit his written individual proposal and final formal report by the deadline.
o Each student’s performance is evaluated based on:
 Submitted documents 8%
 Simulation &Analysis results 10%
 Presentations. 7% 4
 Software that may be used in this course:
 Matlab
 Power World Simulator (Simulator).
 ETAP (Electrical Transient and Analysis Program).
 Disclaimer:
o The syllabus and the schedule are subject to change. Changes will be announced in class, sent via
e-mail, or posted on the course web site.
o This course also includes projects, computer assignments.
o Instructor will provide the class with appropriate handouts and due dates.

Class code (Power Systems Operation and Management) :

xefm6i
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Introduction
Power system operation
• The main objectives of power system operation are safety,
reliability, and efficiency.

• System operation affects people’s safety, impacts system

reliability, and influences operational costs associated with the
deployment of transmission and generation resources.

• The main actors in power system operation :

 Operator, who is responsible to execute different functions
 Process, which provides a detailed description of how a
function should be executed and
 Technology, which enables and facilitates the process
• Power system operation function.

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 EMS in Power Systems
• Electrical energy management systems (EMS) are an important function for the reliable and efficient operation of
power systems.

• EMS is related to the real time monitoring, operation and control of a power system.

• The information from the power system is read through Remote Terminal Units (RTUs), an integral part of SCADA
to an EMS or Energy Control Centre (ECC).
• Objectives of EMS Wher, Supervisory Control and Data Acquisition (SCADA)
Primary Objectives: Security and Stability of the system
Secondary Objectives: Economic Operation and Control
Tertiary Objectives: Optimization, Operational Planning and Maintenance Scheduling
• Functions and Benefits of EMS:
 Control functions: Real time monitoring, Automatic Control , automation, generation control and load frequency control,
Optimal automatic generation control, Tie -line control.
 Operating functions: Economic and optimal Operation, Efficient operator Decision Making Improved quality of supply.
 Optimization functions: Optimal utilization of the transmission Power, Optimal allocation of resources,…
 Planning functions : Improved quality, reliability, Forecasting, Generation scheduling, Calculation of fuel consumption,
production costs and emissions. 7
• Power and Information flow between Power systems, SCADA and EMS.

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• The working of an EMS is divided into two categories

a. Real time or online applications:

 Control functions: Load Frequency

Control (LFC), Automatic Generation
Control (AGC), Reactive Power Control
(RPC), Voltage Control (VC), Reactive
Power and Voltage Control (QVC)
 Protection Functions: Protective
relaying, Primary protection, Secondary
protection or backup protection

 The functions based on the real-time

functions: Measurements, Monitoring,
Control Actions, State Estimator, Power
Flow, Security Assessment, Contingency
Analysis, Optimal Power Flow….

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i) On-line closed loop control:
Such as:
 Real power dispatch or active power dispatch (APD)
 Reactive Power Dispatch (RPD)
 Active and Reactive Power Dispatch

ii) On-line open loop control

iii) Off line study or simulation model

b. Extended real time of Off line applications

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• Overall SCADA and EMS functions in an control center.

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Network Analysis Functions

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Introduction
(Power System Economics)

What about money?

• Minimizing costs
• Operating costs
• Fuel, personnel, maintenance Money
• Investment costs
• Generators, lines, transformers, switching devices, …

• Maximizing profits
• Competitive electricity markets
• Maximizing utility or benefits
• Consumer’s perspective

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 What about reliability?

• Operational reliability
• Withstand faults, failures, forecasting errors and other
common operational problems
• Operate with a security margin Reliability
• Planning reliability
• Ability to handle long term problems
• Units on long-term maintenance
• Droughts
• Build enough spare capacity

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Cost of reliability

• Providing a security margin and spare capacity costs

money
• Run additional generating units to have some operating
reserve
• Limit production of some generating units to avoid
problems in case of a sudden outage
• Build additional generators and transmission lines to
improve long term reliability

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 Value of reliability
• Poor reliability cause consumer outages
• Outages cause a loss of revenue or comfort
• Measured using surveys
• Estimate of cost of latest outages or
• Willingness to pay extra to avoid outages
• Value of Lost Load (VoLL)
• Average value of a MWh not delivered
• Estimates range from $2,400 to $20,000
• ~ 100 times larger than the cost of energy

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Balancing the greed and the fear

How do we model this balance?

• Mathematical optimization problem
– Cost minimization or profit maximization
– Reliability introduced through constraints
• Explicit costing of reliability is still controversial

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 Environmental impact
Three-way balancing
• More complex optimization problems
• Some environmental effects can be monetized
– Operating cost of renewable generation is essentially zero
– Carbon tax or carbon trading to reflect the effect of CO2
emissions
• Others cannot be monetized
– Effect of hydro generation on salmons
– Modeled using additional operating constraints

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Government energy policy

• Not “pure” economics

• Markets and companies take a short term view
• Long term or strategic considerations
• Reduce dependence on imports
• Introduction of competitive electricity markets
• Choice of primary energy sources
• Promotion of wind and photovoltaic in Germany
• Nuclear power in France
• Energy conservation in the Pacific Northwest

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Organization of the electricity supply industry
Outline
• Traditional organization Generation
• Reasons for change
• Actors in a deregulated environment
Transmission
• Models of competition

Traditional electric utility model Distribution

• Monopoly
– Only supplier of electricity in a given region (“service territory”)
Retail
– Consumer does not have a choice of supplier

• Vertically integrated
– A single organisation performs all the technical and business
functions
Consumer
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Variants on vertical integration
• Distribution + retail
– Many municipal utilities
– Rural electricity cooperatives
• Generation + transmission
– Power Administration

Why monopolies?
• Building a power system is expensive
• Building competing transmission and distribution networks does not make sense
• Until recently having several companies “share” a power system was too complicated
• Monopoly can be:
– Private (investor-owned utility)
– Public (municipal, utility district, national)
• Size of service territories varies
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 Regulation
• A private monopoly could abuse its position
• It must be regulated by the government
• Government-owned utilities operate for the public good
• No need for outside regulation
• Elect new representatives if we are not satisfied

The “Regulatory Compact”

• Agreement between an Investor Owned Utility (IOU) and a government

• IOU receives the right to be the monopoly supplier over a certain territory
• IOU accepts that its rates (i.e. what it can charge consumers) will be
determined by a regulator
– Example: Washington Utilities and Transportation Commission

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Rate of return regulation
• Regulator sets the rates so that the IOU can:
• Recover its operating cost (fuel, personnel, etc…)
• Recover its investments costs (plants, lines, etc…)
• Pay a fair rate of return to its investors
• A monopoly utility is a low risk investment
• No competition
• A bankrupt utility is in nobody’s interest
• The rate of return can therefore be low compared to other investments
Problems with Private Monopolies
• Monopolies are inefficient
– No competition
– No need to be efficient to survive
– No incentive to be efficient:
• Utility earns more if it invests more
• No penalty for building “white elephants”
• High costs passed on to consumers as high prices of electricity
• A bankrupt utility is in nobody’s interest
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• Rates are “higher than they should be”
Could the regulators do better?
• Regulation is difficult
– Little basis for comparison
• Each regulator oversees a small number of utilities
• Each utility has a territory with different characteristics
– Difficult to evaluate the utilities’ decisions
• Regulator does not have as much staff as the utility
• Information imbalance

Problems with Public Monopolies

• A good government will run its utilities in an efficient and far-sighted
manner
• This is not always the case
• Government bodies are not always efficient either
• Conflicts can arise between the objectives of the government and the
objectives of the utility
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Things bad governments do…
• Keep rates low to please the voters
• Utility does not have enough money for investments
• Keep rates high and use the surplus money for other programs
• Inefficient taxation
• Discourage consumption of electricity
• Force the utility to make unnecessary investments to create jobs
The “new” electricity supply model
• Privatization of public utilities
– Not in the US
– Primarily in Europe and South America
• “Unbundling”
– Separate the different functions of the utility
• Introduce competition
– Treat electrical energy (MWh) as a commodity
– Create markets for trading this commodity
– Energy transmission and distribution remain services provided by monopoly companies
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 Expected benefits of privatization
• Utility can focus on its mission
• If properly regulated:
• Utility gets the revenues it needs
• Price of electricity reflects its true cost
• Optimal allocation of economic resources
• Access to private sector capital
• Important in developing countries when government is short of money for
investments
• Revenue from the sale of privatized assets

Expected benefits of unbundling

• Separation between the parts where competition is possible and those where a
monopoly is needed:
– Competition between generators
– Monopoly for transmission and distribution
• More transparency in the the system
• Essential to create a fair market
– An independent system operator will not favor one generator over another 26
Expected benefits of competition

Introduce Generators become

competition more efficient

Production cost
Economy benefits
decreases

Price to consumers
Competitive market
decreases

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Dramatis Personae
(who are the characters in the play) The Utility

 The old model

 Customer (old model)

The
Regulator
The Customer
(silent part)

Data from National Grid (UK)

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Actors after full unbundling
• Generating companies
• Electricity retailers
• Consumers
• System operator
• Transmission owner
• Distribution company
• Market operator
• Regulator
Note: Some of these functions are often combined

Generating companies
• Own and operate power generating plants
• Compete against each other to sell energy
• Competitive advantages
– More efficient plants
– Cheaper fuel
– Higher plant availability 29
 Retailers
• Buy electrical energy from the generators
• Sell electrical energy to consumers
• Do not own large physical assets
• Often owned by a generator or a distribution company
• Competitive advantages
• Negotiate good price with generators
• Identification of “good” customers
• Efficient billing system
Consumers
• Small consumers
– Residential or commercial consumers
– Buy electricity from a retailer
– Buy electricity on a tariff (i.e. fixed price)
• Large consumers
– Industrial or large commercial consumers
– May buy directly from the electricity market
– May buy electricity at time-varying prices
• Expected to become increasingly active 30
Independent System Operator
• Operates the power system
• Maintain load/generation balance
• Maintain network security
• Must be independent from other participants to ensure fairness of market
• Owns only computing and communication assets

Transmission Network Owners

• Own and maintain transmission assets
• Lines
• Substations
• DC lines
• Usually a regulated business
• Revenues determined by the regulator based on the value of the assets

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Distribution Network Companies
• Own and operate the distribution networks
• Regulated business
– Revenues determined by the regulator based on the value of the assets

Market Operator
• Facilitate trading of electricity
• Matches bids and offers submitted by buyers and sellers of electrical energy
• Runs the market settlement system
• Monitors delivery of energy
• Forwards payments from buyers to sellers
• Requirements:
• Fairness, independence
• Efficient technology to support trading
• Efficient settlement of trades
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Regulator
• Oversees the operation of the electricity market
• Determines the allowed revenues of the monopolies (“wire companies”, i.e.
transmission and distribution owners)
• Check that the wire companies maintain the quality of service
• Government body

New actors?
• Storage system operators
• Aggregators of demand response
– Example: charging of electric vehicles

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The Four Models of Competition

• Monopoly
• Purchasing agency Generation
• Wholesale competition
Transmission
• Retail competition
Monopoly Distribution

Retail

Consumer 34
Purchasing Agent

IPP Own Generators IPP

Wholesale
Purchasing Agent

Distribution

IPP: Independent
Power Producer Customer
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Wholesale Competition

Genco Genco Genco Genco Genco

Wholesale Market and Transmission Wires

Disco Disco Disco Disco

Customer Customer Customer Customer

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Retail Competition

Genco Genco Genco Genco Genco

Wholesale Market and Transmission Wires

Retailer Retailer Retailer

Retail Market and Distribution Wires

Customer Customer Customer Customer

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Typical re-bundling
• Distribution + retail
• Generation + transmission network owner
• Generation + retail
• System operator + market operator
• Transmission owner + distribution owner

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Subjects of term paper in power system
• New Optimal methods
• State Estimation method
• Observability
• Power Flow new Techniques
• Contingency Analysis
• Power System Stability
• Automatic Generation Control
• System Monitoring
• EMS Control Actions
• ………..

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Thank you

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