EE 369

POWER SYSTEM ANALYSIS

Lecture 16
Economic Dispatch
Tom Overbye and Ross Baldick

1
 Announcements
 Read Chapters 6 (section 6.12) and 7
(sections 7.1 to 7.3).
 Homework 12 is 6.62, 6.63, 6.67 (calculate
economic dispatch for values of load from
55 MW to 350 MW); due Tuesday, 11/29.
 Class review and course evaluation on
Tuesday, 11/29.
 Midterm III on Thursday, 12/1, including
material through Homework 12.
2
Economic Dispatch: Formulation
 The goal of economic dispatch is to determine the
generation dispatch that minimizes the instantaneous
operating cost, subject to the constraint that total
generation = total load + losses

m
Minimize CT   Ci ( PGi )
i 1
Initially we'll
Such that ignore generator
m limits and the
 PGi  PD  PLosses losses
i 1 3
 Unconstrained Minimization
 This is a minimization problem with a single
equality constraint
 For an unconstrained minimization a necessary
(but not sufficient) condition for a minimum is the
gradient of the function must be zero,
 The gradient generalizes the first derivative for
f ( x )  0
multi-variable problems:

 f (x) f (x) f (x) 

f ( x )   , , , 
 1 x  x2 x n 
4
Minimization with Equality Constraint
 When the minimization is constrained with an equality
constraint we can solve the problem using the method
of Lagrange Multipliers
 Key idea is to represent a constrained minimization
problem as an unconstrained problem.

That is, for the general problem

minimize f (x) s.t. g(x)  0
We define the Lagrangian L(x,λ )  f (x)  λ T g(x)
Then a necessary condition for a minimum is the
L x (x,λ )  0 and L λ (x,λ )  0 5
Economic Dispatch Lagrangian
For the economic dispatch we have a minimization
constrained with a single equality constraint
m m
L(PG ,  )   Ci ( PGi )   ( PD   PGi ) (no losses)
i 1 i 1
The necessary conditions for a minimum are
L(PG ,  ) dCi ( PGi )
   0 (for i  1 to m)
PGi dPGi
m
PD   PGi  0
i 1
6
 Economic Dispatch Example
What is economic dispatch for a two generator
system PD  PG1  PG 2  500 MW and
C1 ( PG1 )  1000 20 PG1  0.01PG21 $/h
C2 ( PG 2 )  400 15PG 2  0.03PG22 $/h
Using the Lagrange multiplier method we know:
dC1 ( PG1 )
  20  0.02 PG1   0
dPG1
dC2 ( PG 2 )
  15  0.06 PG 2   0
dPG 2
500  PG1  PG 2  0
7
 Economic Dispatch Example,
cont’d
We therefore need to solve three linear equations
20  0.02 PG1   0
15  0.06 PG 2   0
500  PG1  PG 2  0
0.02 0 1  PG1   20 
 0 0.06 1  PG 2    15 
    
 1 1 0      500 
 PG1   312.5 MW 
 P    187.5 MW 
 G2   
    26.2 $/MWh  8
Economic dispatch example, cont’d
• At the solution, both generators have the same marginal
(or incremental) cost, and this common marginal cost is
equal to λ.
• Intuition behind solution:
– If marginal costs of generators were different, then by
decreasing production at higher marginal cost generator, and
increasing production at lower marginal cost generator we
could lower overall costs.
– Generalizes to any number of generators.
• If demand changes, then change in total costs can be
estimated from λ.

9
Economic dispatch example, cont’d
• Another way to solve the equations is to:
– Rearrange the first two equations to solve for PG1 and PG2
in terms of λ,
– Plug into third equation and solve for λ,
– Use the solved value of λ to evaluate PG1 and PG2.
• This works even when relationship between
generation levels and λ is more complicated:
– Equations are more complicated than linear when there
are maximum and minimum generation limits or we
consider losses.
10
 Lambda-Iteration Solution Method
• Discussion on previous page leads to “lambda-
iteration” method:
– this method requires a unique mapping from a value of
lambda (marginal cost) to each generator’s MW output:
– for any choice
PGi ( ).of lambda (common marginal cost), the
generators collectively produce a total MW output,
– the method then starts with values of lambda below
and above the optimal value (corresponding to too little
and too much total output), and then iteratively
brackets the optimal value.

• 11
 Lambda-Iteration Algorithm
Pick  L and  H such that
m m
 Gi )  PD  0
P (  L
 Gi )  PD  0
P (  H

i 1 i 1

While  H   L   Do
 M  ( H   L ) / 2
m
If  Gi
P (  M
)  PD  0 Then  H
  M

i 1

Else  L   M
End While 12
Lambda-Iteration: Graphical View
In the graph shown below for each value of lambda
there is a unique PGi for each generator. This
relationship is the PGi() function.

13
 Lambda-Iteration Example
Consider a three generator system with
IC1 ( PG1 )  15  0.02 PG1   $/MWh
IC2 ( PG 2 )  20  0.01PG 2  $/MWh
IC3 ( PG 3 )  18  0.025 PG 3  $/MWh
and with constraint PG1  PG 2  PG 3  1000MW
Rewriting generation as a function of  , PGi ( ),
we have
  15   20
PG1 ( )  PG2 ( ) 
0.02 0.01
  18
PG3 ( )  14
0.025
Lambda-Iteration Example, cont’d
m
Pick  L so  Gi )  1000  0 and
P (  L

i=1
m
 Gi )  1000  0
P (  H

i=1
m
Try  L
 20 then  PGi (20)  1000 
i 1
  15   20   18
   1000  670 MW
0.02 0.01 0.025
m
Try  H  30 then  PGi (30)  1000  1230 MW
i 1
15
Lambda-Iteration Example, cont’d
Pick convergence tolerance   0.05 $/MWh
Then iterate since  H   L  0.05

 M  ( H   L ) / 2  25
m
Then since  Gi
P (25)  1000  280 we set  H
 25
i 1
Since 25  20  0.05
 M  (25  20) / 2  22.5
m
 Gi
P (22.5)  1000  195 we set  L
 22.5
i 1 16
Lambda-Iteration Example, cont’d
Continue iterating until  H   L  0.05
*
The solution value of  ,  , is 23.53 $/MWh
Once  * is known we can calculate the PGi
23.53  15
PG1 (23.5)   426 MW
0.02
23.53  20
PG 2 (23.5)   353 MW
0.01
23.53  18
PG 3 (23.5)   221 MW
0.025
17
 Thirty Bus ED Example
Case is economically dispatched (without considering
the incremental impact of the system losses).

18
 Generator MW Limits
 Generators have limits on the minimum and
maximum amount of power they can
produce
 Typically the minimum limit is not zero.
 Because of varying system economics usually
many generators in a system are operated at
their maximum MW limits:
 Baseload generators are at their maximum limits
except during the off-peak.
19
Lambda-Iteration with Gen Limits

In the lambda-iteration method the limits are taken

into account when calculating PGi ( ) :
if calculated production for PGi  PGi ,max
then set PGi ( )  PGi ,max
if calculated production for PGi  PGi ,min
then set PGi ( )  PGi ,min

20
Lambda-Iteration Gen Limit Example
In the previous three generator example assume
the same cost characteristics but also with limits
0  PG1  300 MW 100  PG2  500 MW
200  PG3  600 MW
With limits we get:
m
 PGi (20)  1000  PG1 (20)  PG 2 (20)  PG 3 (20)  1000
i 1
 250  100  200  1000
 450 MW (compared to  670MW)
m
 PGi (30)  1000  300  500  480  1000  280 MW
i 1 21
Lambda-Iteration Limit Example,cont’d
Again we continue iterating until the convergence
condition is satisfied.
With limits the final solution of  , is 24.43 $/MWh
(compared to 23.53 $/MWh without limits).
Maximum limits will always cause  to either increase
or remain the same.
Final solution is:
PG1 (24.43)  300 MW (at maximum limit)
PG 2 (24.43)  443 MW
PG 3 (24.43)  257 MW
22
 Back of Envelope Values
 $/MWhr = fuelcost * heatrate + variable O&M
 Typical incremental costs can be roughly approximated:
– Typical heatrate for a coal plant is 10, modern combustion
turbine is 10, combined cycle plant is 6 to 8, older combustion
turbine 15.
– Fuel costs ($/MBtu) are quite variable, with current values
around 2 for coal, 3 to 5 for natural gas, 0.5 for nuclear,
probably 10 for fuel oil.
– Hydro costs tend to be quite low, but are fuel (water)
constrained
– Wind and solar costs are zero.

23
Inclusion of Transmission Losses
 The losses on the transmission system are a
function of the generation dispatch.
 In general, using generators closer to the load
results in lower losses
 This impact on losses should be included when
doing the economic dispatch
 Losses can be included by slightly rewriting the
Lagrangian to include losses PL:
m  m 
L(PG ,  )   Ci ( PGi )    PD  PL ( PG )   PGi 
i 1  i 1  24
 Impact of Transmission Losses
The inclusion of losses then impacts the necessary
conditions for an optimal economic dispatch:
m  m 
L(PG ,  )   Ci ( PGi )    PD  PL ( PG )   PGi  .
i 1  i 1 
The necessary conditions for a minimum are now:
L(PG ,  ) dCi ( PGi )  PL ( PG ) 
   1   0
PGi dPGi  PGi 
m
PD  PL ( PG )   PGi  0
i 1
25
 Impact of Transmission Losses
dCi ( PGi )  PL ( PG ) 
Solving for  , we get:   1   0
dPGi  PGi 
1 dCi ( PGi )
 
 PL ( PG )  dPGi
 1  P 
 Gi 
th
Define the penalty factor Li for the i generator
(don't confuse with Lagrangian L!!!)
1 The penalty factor
Li 
 PL ( PG )  at the slack bus is
 1  P  always unity!
 Gi  26
 Impact of Transmission Losses
The condition for optimal dispatch with losses is then
L1 IC1 ( PG1 )  L2 IC2 ( PG 2 )  Lm ICm ( PGm )  
1
Li  . So, if increasing PGi increases
 PL ( PG ) 
 1  P 
 Gi 
PL ( PG )
the losses then  0  Li  1.0
PGi
This makes generator i appear to be more expensive
(i.e., it is penalized). Likewise Li  1.0 makes a generator
appear less expensive.
27
Calculation of Penalty Factors
Unfortunately, the analytic calculation of Li is
somewhat involved. The problem is a small change
in the generation at PGi impacts the flows and hence
the losses throughout the entire system. However,
using a power flow you can approximate this function
by making a small change to PGi and then seeing how
the losses change:
PL ( PG ) PL ( PG ) 1
 Li 
PGi PGi PL ( PG )
1
PGi 28
 Two Bus Penalty Factor Example

PL ( PG ) PL ( PG ) 0.37 MW

 0.0387   0.037
PG 2 PG 2 10 MW
L2  0.9627 L2  0.9643 29
 Thirty Bus ED Example
Now consider losses.
Because of the penalty factors the generator incremental
costs are no longer identical.

30
 Area Supply Curve
The area supply curve shows the cost to produce the
next MW of electricity, assuming area is economically
dispatched 10.00

7.50

Supply
curve for
5.00
thirty bus
system
2.50

0.00
0 100 200 300 400
Total Area Generation (MW)

31
 Economic Dispatch - Summary
 Economic dispatch determines the best way to
minimize the current generator operating costs.
 The lambda-iteration method is a good approach for
solving the economic dispatch problem:
– generator limits are easily handled,
– penalty factors are used to consider the impact of losses.
 Economic dispatch is not concerned with determining
which units to turn on/off (this is the unit commitment
problem).
 Basic form of economic dispatch ignores the
transmission system limitations.
32
 Security Constrained ED
or Optimal Power Flow
 Transmission constraints often limit ability to
use lower cost power.
 Such limits require deviations from what would
otherwise be minimum cost dispatch in order to
maintain system “security.”
 Need to solve or approximate power flow in
order to consider transmission constraints.

33
 Security Constrained ED
or Optimal Power Flow
 The goal of a security constrained ED or optimal
power flow (OPF) is to determine the “best” way
to instantaneously operate a power system,
considering transmission limits.
 Usually “best” = minimizing operating cost, while
keeping flows on transmission below limits.
 In three bus case the generation at bus 3 must
be limited to avoid overloading the line from bus
3 to bus 2.

34
Security Constrained Dispatch
-22 MW 22 MW
Bus 2 4 MVR -4 MVR Bus 1
1.00 PU
357 MW
179 MVR
1.00 PU
0 MW
100% 37 MVR
-122 MW
194 MW OFF AGC -142 MW
49 MVR 41 MVR 100 MW
232 MVR AVR ON
145 MW 100% 124 MW
-37 MVR -33 MVR
Bus 3 1.00 PU
Home Area
179 MW
Scheduled Transactions 89 MVR
100.0 MW 448 MW AGC ON
19 MVR AVR ON

Need to dispatch to keep line

from bus 3 to bus 2 from overloading
35
 Multi-Area Operation
 In multi-area system, “rules” have been established
regarding transactions on tie-lines:
– In Eastern interconnection, in principle, up to “nominal”
thermal interconnection capacity,
– In Western interconnection there are more complicated
rules
 The actual power that flows through the entire network
depends on the impedance of the transmission lines,
and ultimately determine what are acceptable patterns
of dispatch:
 Can result in need to “curtail” transactions that otherwise
satisfy rules.
 Economically uncompensated flow through other areas
is known as “parallel path” or “loop flows.”
 Since ERCOT is one area, all of the flows on AC lines are
inside ERCOT and there is no uncompensated flow on
AC lines. 36
 Seven Bus Case: One-line
System has
three areas 44 MW -42 MW -31 MW 31 MW 80 MW
1.05 PU
3
0.99 PU
4
30 MVR Top area
1 1.00 PU
62 MW 106 MW -37 MW 110 MW -32 MW
has five
AGC ON 40 MVR
94 MW
buses
Case Hourly Cost AGC ON
38 MW 16933 $/MWH
-14 MW
-61 MW
32 MW
1.04 PU 79 MW -77 MW 1.01 PU
2
Top Area Cost 5
8029 $/MWH
40 MW
40 MW -39 MW 130 MW No net
20 MVR 40 MVR
168 MW AGC ON interchange
-40 MW 20 MW -20 MW
40 MW between
1.04 PU 1.04 PU Any areas.
6 20 MW 7
-20 MW
200 MW 200 MW
0 MVR Left Area Cost Right Area Cost
Left area 200 MW AGC ON
4189 $/MWH 4715 $/MWH
201 MW AGC ON
0 MVR

has one
Right area has one
bus
bus 37
 Seven Bus Case: Area View
Area Losses
Top 7.09 MW

Actual
40.1 MW
flow
-40.1 MW
0.0 MW
0.0 MW between
System has areas
40 MW of
Scheduled
“Loop Flow”
Left Right flow
Area Losses 40.1 MW Area Losses
0.33 MW 0.0 MW 0.65 MW

Loop flow can result in higher losses

38
 Seven Bus - Loop Flow?
Area Losses
Top 9.44 MW

Note that
4.8 MW
0.0 MW
-4.8 MW Top’s
0.0 MW
Losses have
increased
from
7.09MW to
Left Right
9.44 MW
Area Losses 104.8 MW Area Losses
-0.00 MW 100.0 MW 4.34 MW

100 MW Transaction Transaction has

between Left and Right actually decreased
the loop flow 39