POWER SYSTEM DEREGULATION

by

Prof. D.M. Vinod Kumar

Dept. of Electrical Engineering
National Institute of Technology
Warangal – 506 004

Dec 8, 2021 Hyderabad 1

 Indian Power Sector - Historical Background

More than 100 years old - First Hydro power plant in 1890s
in Darjeeling.
At the time of independence, total installed capacity 1900
MW. Mostly owned by private companies in urban areas.
In order to ensure coordinated development of Regional /
National Grids, separation of Generation and Transmission
Business at Central Sector has taken place during 1992-93
by amalgamating and transferring the transmission assets of
Central and Joint Sector to NPTC (now POWERGRID).

Power Generation was opened to private sector in 1991,

followed by transmission in 1998. Electricity Regulatory
Commissions Act was enacted in 1998 for establishing
Regulatory Commissions.
Dec 8, 2021 Hyderabad 2
 Indian Power Sector

Installed Capacity as on 31.01.2003 was 107504 MW, out of

which more than 60 percent belongs to state sector, 30
percent in the central sector and 10 percent in the private
sector.
Out of total installed capacity Hydro-26660 MW , Coal
63801MW,Gas-11561MW, Diesel-1163MW (Total thermal-
76525 MW), Wind-1628 MW & Nuclear-2720MW.
Still the Energy shortage is about 9.1% and peak load
shortage is about 12.2%. T&D losses about 30%

Dec 8, 2021 Hyderabad 3

 Indian Power Sector

Practically no integration between REBs

NREB EREB NEREB SREB WREB

Delhi Bihar Assam Kerala Goa

SE
art

Bs
Int
eg

ed
SE

Rajasthan
rat

Bs
Tripura Karanataka Gujarat
Int
eg

ed

SE
art

Bs
Int
eg

ed
Orissa
Himachal Sikkim Meghalaya Tamil Nadu Maharastra

SE
art

Bs
Int
eg

ed
Pradesh
SE
art

Bs
ed
eg

Punjab West Manipur Andhra Madhaya

Bengal Pradesh Pradesh
Haryana
Mizoram
Jammu &
Nagaland
Kashmir

Uttar Arunachal
Pradesh Pradesh

Figure : Structure of Indian power sector (CEA, 1997)*

Dec*New
8, 2021
states such as Uttaranchal in NREB,Hyderabad
Jharkhand in EREB and Chhatisgarh in WREB 4
 System Operation (present)

At regional level – Five RLDCs viz. NRLDC, SRLDC,

ERLDC, WRLDC and NERLDC.
SRLDCs in each state.
RLDCs have been modernized with modern Energy
Management System tools (A hierarchical structure is
shown)
SLDCs carry out the optimum scheduling of the state
generating units and the RLDCs are responsible for
scheduling of the Central Sector Generating Units only.
SLDCs send the requisition to the RLDCs against their
entitlements out of available power from Central Sector
Generation and the RLDCs allocate total available power to
various
Dec 8, 2021
states in the ratio ofHyderabad
their entitlements. 5
A Typical Architecture of an Energy Management System
Dec 8, 2021 Hyderabad 6
 Advance Functions of Energy Management System

Supervisory Control & Data Acquisition (SCADA) functions

System Monitoring and Alarm Functions
State Estimation
On line Load Flow
Economic Load Dispatch
Optimal Power Flow ( including Optimal Reactive Power Dispatch)
Security Monitoring and Control
Automatic Generation Control
Unit Commitment
Load Forecasting
Log Report Generation ( Periodic & Event logs), etc.

A program scheduler may invoke various Application

programs at fixed intervals.
Dec 8, 2021 Hyderabad 7
 Uncertainties

Generation
Possibility of breakdown
Changes in availability
Day–ahead bid does not for
bidding contract
Prices can change daily- ‘Merit
Order’ is volatile
Can close at short notice
Can connect anywhere
Dec 8, 2021
Demand
Demand forecast inaccuracies
Weather forecast inaccuracies
Fault causing demand loss
Price/ demand elasticity
Customer demand
management
Hyderabad 8
 Dictionary Meaning

• Regulate = Control or direct by means of

rules and restrictions

• Deregulate = Remove the regulations

(Control)

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 Definition

Deregulation is the Process of removing

restrictions and regulations to achieve
competitive wholesale prices without
compromising adequacy, system reliability
and security.

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 It is known in different names
• Re-regulated market
• Open Power Market
• Competitive Power Market
• Vertically unbundled power system
• Open Access
• Power System Restructuring

Dec 8, 2021 Hyderabad 11

 Motivation
• Reduce Prices
• Improve Services
• Foster innovation through competition
• Increase efficiency
• Foster customer choice
• Promote transmission Open Access
• Ensure competitiveness in Generation

Dec 8, 2021 Hyderabad 12

 Vertically Organized Utility (VOU)
• The electricity sector has been a regulated
monopoly
• Consumers had one electricity provider
• Utilities were obligated to provide
electricity to everyone
• Regulatory agencies were responsible for
the price.

Dec 8, 2021 Hyderabad 13

 Transformation Process

Generation Vertical
Business Separation
Horizontal cut

Transmission
Vertical Business
Unbundling
(of a vertically
bundled Distribution
system) Business

Dec 8, 2021 Hyderabad 14

 Vertical cut
Generation
Business Horizontal
Separation

Transmission
Horizontal Business
Unbundling
(of a vertically
unbundled system)
Distribution
Business

Dec 8, 2021 Hyderabad 15

 Gencos Gencos IPP IPP

Inter-state

Power Pool Transmission

Tie-line Utilities

Discos Discos Discos

C C C C C C Consumers

Pool as Purchasing Agent Model

Dec 8, 2021 Hyderabad 16

 Genco Genco IPP IPP

Transmission Wires
Wholesale Market

Retailer DISCO Retailer DISCO

Distribution Wires
Retail Market

Customer Customer Customer Customer

Wholesale & Retail Competition Model

Dec 8, 2021 Hyderabad 17
 Real Time Control
Real-time control includes:
--Monitor power system
operation and status

--Monitor system security

--Conduct physical network

operations and network
switching

--Deal with outages and

emergencies

Dec 8, 2021 --Co-ordinate Hyderabad

real time 18
system operation
 Electric Sector History
Before After
 State Monopoly  Market (Competition)
 Low Private Investment  High Private Investment
 State as Owner  State as consolidate
Regulator & Policy Maker
 Agents assume
 Users paying Costs of
inefficiency inefficiency
 All activities Regional  Regulated natural
monopolies
Monopoly

Dec 8, 2021 Hyderabad 19

 Features of Deregulated
Environment
• Generation, Transmission and Distribution
are independent activities
• Competition among generators for
customers
• Transmission is still a monopoly
• Customer driven market price setting

Dec 8, 2021 Hyderabad 20

 Advantages of Deregulated
Environment
 Cheaper electricity
 Efficient capacity expansion planning
 Pricing is Cost reflective, rather than a set
tariff
 Cost minimization
 More choice & better service

Dec 8, 2021 Hyderabad 21

As Deregulation proceeds the distinct
industries will arise which specialize in
only one of these areas:
GENCO (GENeration COmpany)
TRANSCO (TRANSmission COmpany)
DISCO (DIStribution Company

Competition will replace co-operation.

Competition will spur technological growth.

Dec 8, 2021 Hyderabad 22

 POWER SYSTEM DE-REGULATION

GENCO GENCO GENCO

TRANSCO

DISCO DISCO DISCO

Dec 8, 2021 Hyderabad 23

 ENTITIES RESULTING FROM
DE-REGULATION

SO

GENCO TRANSCO DISCO

Dec 8, 2021 Hyderabad 24

 What will be the Transformation
• Vertically Integrated --- Vertically unbundled
• Regulated cost-based --- Unregulated price
based
• Monopoly --- Competition
• Service --- Commodity
• Consumer --- Customer
• Privilege --- Choice
• Engineers --- Lawyers / Managers

Dec 8, 2021 Hyderabad 25

 Independent System Operator (ISO)

The ISO would provide all operating

functions for the power system to
guarantee its reliability.
ISO would be a separate operating
company that would grant access to the
transmission system.
Non-profit Government Organization

Dec 8, 2021 Hyderabad 26

 Responsibilities of ISO
 Power delivery or ensuring the required
power transportation services
 System security functions
(ensure security, stability and economic
operation of power system)
 Transmission Pricing (wheeling charges
calculation) & Transmission facilitites
provision.
Dec 8, 2021 Hyderabad 27
 Responsibilities of ISO (Contd)
 Assure open transmission access &
energy market co-ordination
 Power Market administration (Power
exchange PX)
 Ancillary services provision & their cost
allocation amongst transacting prices.

Dec 8, 2021 Hyderabad 28

 Competition
• In competition two or more entities are
competing for the same business or
opportunity.
• In power system, competition can be
introduced in Generation and Distribution
business

Dec 8, 2021 Hyderabad 29

 OASIS
(Open Access Same-time Information System)

• Transmission operators to post available

transmission capability on an OASIS so
that anyone desiring to use the
transmission system can obtain
information on how heavily it is being
used.

Dec 8, 2021 Hyderabad 30

 Power Exchange (PX)
• An organization that operates a market-
place for wholesale power, allowing
buyers and sellers to anonymously sell
electric power at the prevailing market
price, determined through some sort of
auction process.
• A “Stock Exchange” for Electric Power

Dec 8, 2021 Hyderabad 31

 Wheeling
• The service of Transporting power from
one location to another for a fee. The term
was coined in the days of regulated
electric utilities, when one utility would
“wheel” power through another’s power
system .

Dec 8, 2021 Hyderabad 32

 Power Traders
Like the stockbrokers, a deregulated market
may have power traders, who assist the
purchasers/sellers in finalizing the deal
generally for the short term in the spot
market.
However they can also assist the concerned
parties in finalizing the long term contracts.
Power traders provide their services to the
concerned parties on charge basis.
Ex: Power Trading Corporation of India Ltd.,
Dec 8, 2021 Hyderabad 33
 Technical Issues
• Available Transfer Capability (ATC)
Calculation
• Congestion Management
• Transmission Pricing
• Bid Settlement
• Ancillary Services Management
(Volt./Var control, Frequency control/AGC
etc.)
Dec 8, 2021 Hyderabad 34
 Definition of ATC
• Available Transfer Capability (ATC) is a measure
• of the transfer capability remaining in the physical
• Transmission network for further commercial
activity
• over and above already committed uses.

• Mathematically ATC is defined as

•
• ATC = TTC – TRM – ETC - CBM

Dec 8, 2021 Hyderabad 35

 ATC Determination
• Static ATC
--Line Power flow or Current limits
--Voltage limits
--Generation Reactive Power Limit
• Dynamic ATC
--Line Power flow or Current limits
--Voltage limits
--Generation Reactive Power Limit
--Voltage Collapse Limits
--Angular Stability Limits
Dec 8, 2021 Hyderabad 36
 Different Transactions
• A bilateral transaction is a direct Contract
between a seller and a buyer, whereas a
multilateral contract is a direct contract
between a group of buyers and group of
sellers.

Dec 8, 2021 Hyderabad 37

 ATC Under Operating Constraints

Power Flow Stability Limit

A to B (MW)
Voltage Limit
Thermal Limit

Total Transfer
Capability

Time

Dec 8, 2021 Hyderabad 38

 ATC Methods

ATC Methods Description

DC Power Flow Model,

Linear Approximation Method
Thermal Limit Only

AC Power Flow Model,

Optimal Power Flow Method
Thermal Limit + Voltage Limit

AC Power Flow Model,

Continuation Power Flow Method Thermal Limit + Voltage Limit
(Voltage Collapse)
Time Domain Simulations with
Stability-Constrained ATC Method
Dynamic Model

Dec 8, 2021 Hyderabad 39

• Power Transactions between a specific seller
bus/area and a buyer bus/area can be
committed only when sufficient ATC is
available.
• The information about the ATC is to be
continuously updated in real-time and made
available to the market participants through
OASIS.
• ISO evaluates the Transactions in real-time.
• Hence ATC must be computed fast and
accurately.

Dec 8, 2021 Hyderabad 40

Dec 8, 2021 Hyderabad 41
 Why ATC is Important
• It’s the point where power system
reliability meets electricity market
efficiency.
• ATC can have a huge impact on market
outcomes and system reliability, so the
results of ATC are of great interest to all
involved.

Dec 8, 2021 Hyderabad 42

 Fast ATC Analysis Goal =
Avoid Power Flow Solutions
• When completely solving ATC, the number of power flow
solutions required is equal to the product of
– The number of contingencies
– The number of iterations required to determine the ATC (this is
normally smaller than the number of contingencies)
• We will look at three methods (2 are linearized)
– Single Linear Step (fully linearized)
• Perform a single power flow, then all linear (extremely fast)
– Iterated Linear Step (mostly linear, Contingencies Linear)
• Requires iterations of power flow to ramp out to the maximum
transfer level, but no power flows for contingencies.
– (IL) then Full AC
• Requires iterations of power flow and full solution of contingencies

Dec 8, 2021 Hyderabad 43

 Market Power
• Market Power can be exercised by
withholding the output of Generators.
• Market Power, in economic aspect, is the
ability of profit by moving the market price
away from the competitive level.
• Market Power to a seller is the ability
profitably to maintain prices above
competition level for a significant period of
time.
Dec 8, 2021 Hyderabad 44
 Potential of Market Power
• Market Power is Harmful to competition and it
is necessary to identify the potential for its
abuse, and to take steps to mitigate the
Market power.
• The Potential of market power in electricity is
greater than any other commodity because:
(i) Electricity cannot be stored in large quantities.
(ii) End user demand is typically constant (less
elasticity)

Dec 8, 2021 Hyderabad 45

(iii) Trading is directly related to the reliability
of grid and transmission limitations.

(iv) Demand should be equal to the

generation minus losses.

(v) Electricity prices are correlated with other

volatile market

Dec 8, 2021 Hyderabad 46

 Market Power can be exercised primarily in
one of the following ways:
• Economic Withholding:
Economic Withholding means bidding
excessively above the marginal cost of
production and driving up the price.
• Physical Withholding:
(i) Not Scheduling or Bidding part of
available capacity OR
(ii) Declaring false unit outage.
Dec 8, 2021 Hyderabad 47
 Mitigation of Market Power
• Internal Re-organization
• Expansion of transmission networks
• Bidding Contracts
• Demand side bidding
• Price caps (Price upper limits)
• Bid caps

Dec 8, 2021 Hyderabad 48

 Ancillary Services
Ancillary services support the transmission
of energy from resources to loads, while
maintaining reliable operation of the Power
system.

• It is up to the user to avail it self of the

service through one or more service
providers.

Dec 8, 2021 Hyderabad 49

 Definition
• “An Interconnected operation services
necessary to effect transfer of electricity
between purchasing & selling entities and
which a transmission provider must
include in an open access transmission
tariff.”

Dec 8, 2021 Hyderabad 50

 The Ancillary services include the following

(i) Voltage support/Reactive Power

service.
(ii) Energy imbalance service
(iii) Regulation & Frequency response
service
(iv) Scheduling, System Control & Dispatch
service

Dec 8, 2021 Hyderabad 51

 Congestion Management
• In a restructured electricity market, when the producers
and consumers of electric energy desire to produce and
consume in amounts that would cause the transmission
network to operate at or beyond one or more transfer
limits, the system is said to be congested.

• There are three different ways to tackle the network congestion:

• - Price Area Congestion Management
• - Available Transfer Capability (ATC) based Congestion
• Management
• - Optimal Power Flow (OPF) based Congestion
• Management
•

Dec 8, 2021 Hyderabad 52

 • Congestion in a two-zone system

$10/MWh $20/MWh $10/MWh $20/MWh

A B A 150 MW B
200MW 0 MW

100 MW 50 MW
100 Line 100 MW 100 MW 100 MW
MW Congested
No Congestion With 50 MW transfer limit
Total Cost=$2000/h Total Cost=$2500/h
Dec 8, 2021 Hyderabad 53
 Congestion Management
• Producers and Consumers of electric energy
desiring to produce and consume in amounts that
cause transmission system to operate at or beyond
one or more transfer limits
• A fundamental transmission management
problem
• Congestion management in the era of deregulation
• The challenge is to create rules to ensure sufficient
control over producers and consumers-rules that
are robust, fair & transparent

Dec 8, 2021 Hyderabad 54

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