Leader-Follower Framework For Control of Energy Services

1. Leader-Follower Framework For Control of Energy Services Ali Keyhani Professor of Electrical and Computer Engineering The Ohio State University Keyhani.1@osu.Edu 614-292-4430

2. Problem Definition • Profit motives by market players results in • Economic efficiency when market is competitive • Disaster when market power is present • Casazza points out that the operational time constant for electric power is zero, and the planning time constant for electric energy services is two to 10 years. Casazza presents an excellent analysis of how free market planning and operation of electric services have created many new problems in security and reliability of electric energy services in a paper entitled “ Electricity Choice: Pick your Poison”

3. Logical Solution • Monitor the market for competitiveness on an ongoing basis • Proactively influence market operation if market power is detected • Practically all existing market monitoring functions work in a reactive mode • Delays of up to several month when reacting to a market power situation

4. Effective Solution - proposed • Constantly monitor market operation and proactively influence the market • Address system reliability (source of market power) at all times • Market would function freely in the absence of market power • seasonal or geographical • Allow rational profit for market players at all times

5. Effective Solution - proposed • Key to this solution • A Market Monitoring Board (MMB) : • Uses historical market data, current balance of supply and demand, underlying power system state, and prevailing reliability requirements to identify market competitiveness and send timely signal to participants • Use the Leader Follower Market Structure, and determine required spinning reserve energy under the MMB control in order to ensure that required security and reliability of the system are attained.

6. MARKET MONITORING BOARD (MMB): Ensures a competitive market in light of system reliability/security requirements and market power concerns. ENERGY MARKETPLACE: Matches supply from power plants and demand from retailers. State Security Reserves Demand Bids Supply Bids INDEPENDENT SYSTEM OPERATOR (ISO): Operates the power system. Demand customer/ Retailers Suppliers/ Power Brokers Market Competitiveness Functions Market Price Signals Figure 1. Leader-Follower Market Frame Work for Control of Energy Services

7. Market Monitoring Board • MMB Calculates Market Competitiveness Function (MCF) and send to all market players • MCF will establish the foundation for bidding behavior of the market players • Conformance with MCFs will ensure that the affected energy market will function both reliably and competitively

8. Market Monitoring Board.. An Active Player • The MMB will estimate the cost of the load being served, act as a player, and select a load response program to supply the spinning reserve requirements. • Develop intelligent Agent based algorithms for computation of the value of the load loss

9. Market Competitiveness Function • MCFs are computed based on the leader-follower optimization algorithms of Stackelberg • MCFs are based on rational profit motives of market players and power system reliability requirements

10. Market Competitiveness Function • Address long term reliability and adequacy of energy systems • Require adequate capacity in the face of growing energy demands with the right mix of fuel supply • Require generators to have the right dynamic responses if the system is to remain stable in the event of an outage • Coordinate between transmission systems, generating systems and load centers to ensure generators do not block each other

11. Solution Algorithm • Forecast system requirements -- loads, reserves • Forecast market players cost plus rational profit • Run a production simulation or OPF model to determine desired TARGET quantity and price for each participating generator • Formulate the global leader-follower optimization problem and evaluate MCFs

12. Solution Algorithm • Send MCFs to market participants and based on market conditions • If market is competitive (there are no reliability concerns) all market players are allowed to ignore MCF • If market power is present all market players must comply with MCFs when preparing their energy bid

13. Mathematical Formulation • Decision makers:: MMB is the leader and Players • Leader declares the constraints of participating in the leader-proposed market opportunities and followers who are interested in the market, but must satisfy the leader’s constraints. • MMB with the decision control variable vector x , and the followers as market players with decision control variable y. • The constraints are defined as MCF. The market players are optimizers who are interested in maximizing their payoff function by knowing MCF. That is for some x = Y, the leader objectives are satisfied.

14. MMB convex objective function can be defined as:

15. Mathematical Formulation • Designate the decision control variables for player “i” • as in MW for the quantity of power with superscript “p” and • In $/MWh to be the price offered to the auction market at a bus ”n”.

16. Designate • inMW for the quantity of power with superscript “p” and • in $/MWh under the MMB controls at bus “n”.

18. n=1,2,… N (4) • The above equation describes the cost of the system operation at bus “n” from the perspective of the MMB in $/hour. Note that since the MMB has control over the load and/or system reserve, the MMB is also a player in the market, and it can influence the market players’ decision to make a rational offer at bus ”n”. Note also,

19. The above equation describes the cost of the system operation at bus “n” from the perspective of the MMB in $/hour. Note that since the MMB has control over the load and/or system reserve, the MMB is also a player in the market, and it can influence the market players’ decision to make a rational offer at bus ”n”. Note also, • (5) • where is in $/hour price offer for generator “i” and • is $/hour for the cost of load response curtailment or the reserve provided by the MMB.

20. . Let us consider the simple constraint that the MMB will be interested in as expressed by the scheduled power injections at each system bus “n”. • n=1,2, .. , N (6)

21. The MMB will perform the optimum power flow (OPF) and determine the rational price offer and the amount of the schedule for each participating generator “i” at bus “n” as target values to formulate the MCF functions.

22. Designate in Xi(k) $/hour by the MMB as its target cost for the generator type i. • Designate and as the desired MMB for • the active power and price to be selected by the players. • From the MMB’s perspective, the optimal operation of the system can be achieved if the market players select the and • such that the hourly cost of operation of generator “i” is equal to Xi(k). To induce the players to select the MMB targets, the MMB defines the MCFs as follows:

23. MCF Function • (7)

24. Conclusions • Market Forces can not plan the planning and operation of Power System. • A framework for planned operation is presented where the state MMB will be an active player in the market. This concept is the same as “National Oil Reserve” Policy. • A solution methodology to control energy services within the restructured electricity markets is presented. • Planned operation of the system is essential to ensure stable prices.

25. Without planned operation, the electric energy system will be subjected to a cycle of deficiencies in energy production that will eventually lead to a cycle of bottlenecks and excessive generation. • This cycle will repeat itself, if it is left to market forces alone to plan the operation of the system. This will result in substantial dislocation in the economy.

26. If you interested in more detail of this presentation go to: • http://eewww.eng.ohio-state.edu/ems • And down load the paper A. Keyhani, Leader-Follower Framework For Control of Energy Services” IEEE Transaction on Power Systems (in print) Paper Number ; 2001TR374