ECE 476

POWER SYSTEM ANALYSIS

Lecture 17
Economic Dispatch and
Optimal Power Flow

Professor Tom Overbye

Department of Electrical and
Computer Engineering
Announcements

 Homework 8 is 11.19, 11.21, 11.26, 11.27, due on

Thursday
 Homework 9 is 7.1, 7.17, 7.20, 7.24, 7.27
– you do not need to turn it in, but should do it before the
exam
 Second exam is Tuesday Nov 13 in class
 Design Project 2 from the book (page 345 to 348)
was due on Nov 15, but I have given you an
extension to Nov 29. The Nov 29 date is firm!

2
Power System Economic Operation

 Power system loads are cyclical. Therefore the installed

generation capacity is usually much greater than the current
load. This allows options on how to meet the current load
 Generation costs can vary widely, with different technologies
balancing
– the capital costs necessary to build the generator
– the costs to actually produce electric power
– for example, nuclear and some hydro have high capital costs and low
operating costs. Natural gas generators have low capital costs, and
higher operating costs

3
Thermal versus Hydro Generation

 The two main types of generating units are thermal and hydro
 For hydro the fuel (water) is free but there may be many
constraints on operation
– fixed amounts of water available
– reservoir levels must be managed and coordinated
– downstream flow rates for fish and navigation
 Hydro optimization is typically longer term (many months or
years)
 In 476 we will concentrate on thermal units, looking at short-term
optimization

4
Generator types

 Traditionally utilities have had three broad groups

of generators
– baseload units: large coal/nuclear; always on at max.
– midload units: smaller coal that cycle on/off daily
– peaker units: combustion turbines used only for several
hours during periods of high demand

5
Generator Cost Curves

 Generator costs are typically represented by up to four different

curves
– input/output (I/O) curve
– fuel-cost curve
– heat-rate curve
– incremental cost curve
 For reference
- 1 Btu (British thermal unit) = 1054 J
- 1 MBtu = 1x106 Btu
- 1 MBtu = 0.29 MWh

6
Heat-rate Curve

Plots the average number of MBtu/hr of fuel input

needed per MW of output.
Heat-rate curve is the I/O curve scaled by MW
Best for most efficient units are
around 9.0

7
Incremental (Marginal) cost Curve

 Plots the incremental $/MWh as a function of MW.

 Found by differentiating the cost curve

8
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
Such that
m
Initially we'll
 PGi  PD  PLosses ignore generator
i=1 limits and the
losses
9
Unconstrained Minimization

 This is a minimization problem with a single

inequality constraint
 For an unconstrained minimization a necessary (but
not sufficient) condition for a minimum is the
gradient of the function must be zero, f (x)  0
 The gradient generalizes the first derivative for
multi-variable problems:

 f (x) f (x) f (x) 

f ( x )   , , , 
 1 x  x2 x n 

10
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 modify a constrained minimization
problem to be 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
11
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

12
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 modify a constrained minimization
problem to be 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
13
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

14
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 $ / hr
C2 ( PG 2 )  400 15 PG 2  0.03PG22 $ / hr
Using the Largrange 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
15
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 
16
Lambda-Iteration Solution Method

 The direct solution only works well if the

incremental cost curves are linear and no generators
are at their limits
 A more general method is known as the lambda-
iteration
– the method requires that there be a unique mapping
between a value of lambda and each generator’s MW
output
– the method then starts with values of lambda below and
above the optimal value, and then iteratively brackets the
optimal value
17
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
18
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.

19
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  1000 MW
Rewriting as a function of  , PGi ( ), we have
  15   20
PG1 ( )  PG2 ( ) 
0.02 0.01
  18
PG3 ( ) 
0.025
20
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
21
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 22
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
PG2 (23.5)   353 MW
0.01
23.53  18
PG3 (23.5)   221 MW
0.025
23
Lambda-Iteration Solution Method

 The direct solution only works well if the

incremental cost curves are linear and no generators
are at their limits
 A more general method is known as the lambda-
iteration
– the method requires that there be a unique mapping
between a value of lambda and each generator’s MW
output
– the method then starts with values of lambda below and
above the optimal value, and then iteratively brackets the
optimal value
24
Generator MW Limits

 Generators have limits on the minimum and

maximum amount of power they can produce
 Often times the minimum limit is not zero. This
represents a limit on the generator’s operation with
the desired fuel type
 Because of varying system economics usually many
generators in a system are operated at their
maximum MW limits.

25
Lambda-Iteration with Gen Limits

In the lambda-iteration method the limits are taken

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

26
 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  450 MW (compared to -670MW)
m
 PGi (30)  1000  300  500  480  1000  280 MW
i 1 27
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). The presence of limits will always
cause  to either increase or remain the same.
Final solution is
PG1 (24.43)  300 MW
PG2 (24.43)  443 MW
PG3 (24.43)  257 MW

28
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). The presence of limits will always
cause  to either increase or remain the same.
Final solution is
PG1 (24.43)  300 MW
PG2 (24.43)  443 MW
PG3 (24.43)  257 MW

29
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). The presence of limits will always
cause  to either increase or remain the same.
Final solution is
PG1 (24.43)  300 MW
PG2 (24.43)  443 MW
PG3 (24.43)  257 MW

30
Thirty Bus ED Example

Case is economically dispatched without considering

the incremental impact of the system losses

31
Back of Envelope Values

 Often times incremental costs can be approximated by a

constant value:
– $/MWhr = fuelcost * heatrate + variable O&M
– Typical heatrate for a coal plant is 10, modern combustion
turbine is 10, combined cycle plant is 7 to 8, older combustion
turbine 15.
– Fuel costs ($/MBtu) are about 1 to 1.5 for coal, 12 for natural
gas, 0.5 for nuclear, probably 13 to 15 for fuel oil.
– Hydro costs tend to be quite low, but are fuel (water) constrained

32
Aside: Cost of Electricity Generation

All values are in 2003 dollars. Nuclear costs do not include

decommissioning costs, which are < 0.1 cents/kWh

Source: California Energy Commission:

http://www.energy.ca.gov/electricity/comparative_costs-v1.html 33
Natural Gas Prices Over the Years
(adjusted for inflation)

Source: US FERC,
http://www.ferc.gov/market-oversight/mkt-gas/overview/2007/ngas-ovr-hh-pr.pdf34
Professor Chapman’s Solar House

 Our own Professor Chapman recently installed a

2870 W solar system for his new house
– Details at http://www.patrickchapman.com/solar.htm

35
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:
m m
L(PG ,  )   Ci ( PGi )   ( PD  PL ( PG )   PGi )
i 1 i 1

36
Impact of Transmission Losses

This small change 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
37
Impact of Transmission Losses
Solving each equation for  we get
dCi ( PGi ) PL ( PG )
  (1  0
dPGi PGi
1 dCi ( PGi )
 
 PL ( PG )  dPGi
 1  P 
 Gi 

Define the penalty factor Li for the i th generator

1 The penalty factor
Li 
 PL ( PG )  at the slack bus is
 1  P  always unity!
 Gi 
38
Impact of Transmission Losses

The condition for optimal dispatch with losses is then

L1IC1 ( PG1 )  L2 IC2 ( PG 2 )  Lm ICm ( PGm )  
1
Since Li  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.
39
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
40
Two Bus Penalty Factor Example

PL ( PG ) PL ( PG ) 0.37 MW

 0.0387   0.037
PG 2 PGi 10 MW
L2  0.9627 L2  0.9643
41
Thirty Bus ED Example
Because of the penalty factors the generator incremental
costs are no longer identical.

42
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)

43
Eastern US Supply Curve

100.0
The y-axis units are $/MWh

75.0

50.0

25.0

0.0
0 150000 300000 450000 600000
Total Area Generation (MW)
44
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)
 Economic dispatch ignores the transmission system limitations

45