DEREGULATED POWER SYSTEM MARKET

1. DEREGULATED POWER SYSTEM MARKET COMPILLED by Dr. P.S.SUBRAMANYAM PROFESSOR, DEPT. OF E.E.E. VIGNANA BHARATHI INSTITUTE OF TECHNOLOGY HYDERABAD-501301, INDIA

3. What is Regulation? Regulation means government has set down laws and rules that puts limits on and define how a particular industry or company Can Operate.

4. What is DEREGULATION? Electric deregulation is the process of changing rules and regulations that control the electric industry to provide customers the choice of electricity suppliers who are either retailers or traders by allowing competition.

5. Why Deregulation? ENCOURAGE PRIVATIZATION INCREASE COMPETITION INCREASE EFFICIENT POWER GENERATION INCREASE EFFICIENT TRANSMISSION INCREASE EFFICIENT DISTRIBUTION RESTRUCTURE INDIAN POWER NETWORK PUBLIC AND PRIVATE SECTOR COORDINATION REDUCE POWER COST

6. DEREGULATED SET UP DISTRIBUTION COMPANY-1 GENERATION COMPANY-1 GOVT. OWNED TRANSMISSI-ON COMPANY DISTRIBUTION COMPANY-2 GENERATION COMPANY-2 GENERATION COMPANY-3 DISTRIBUTION COMPANY-3 INDEPENDENT POWER REGULATOR 8051.in

7. Deregulated Power utility Structure

8. Objectives of restructuring the power market To provide electricity for all reasonable demands. To Promote competition in the generation and supply of electricity. To Protect the interests of electricity customers in respect to prices charged, continuity of supply and the quality of services provided. To Promote efficiency and economy on the part of licensees in supplying and transmitting electricity

9. Benefits of deregulation Systems will operate closer to their capacity. Introduction of a market will optimize energy supply. Price signals will become clearer. Restructuring will bring improved consumer choice. Good technologies will be incorporated sooner, while bad technologies will be ignored or phased out faster. Prices are expected to reduce. Improved price signals after restructuring will improve the efficiency of consumer usage.

10. Challenges and Implementation Issues, post Electricity Act 2003 : Regulatory, Policy & Technical Solutions Deregulation is a re-structuring of the rules and economic incentives that government setup to control and drive the electric supply industry. It is known in different names Re-regulated market Open Power Market Competitive power market Vertically unbundled power system Open access Power system restructuring( Privatization and Reforms)

11. Forces behind Deregulation High tariffs and over staffing Global economic crisis Regulatory failure Political and ideological changes Managerial inefficiency Lack of public resources for the future development Technological advancement Rise of environmentalism Pressure of Financial institutions Rise in public awareness

12. EFFECT OF HAVING D.P.S.M. Vertically integrated => vertically unbundled Regulated cost-based ==> Unregulated price-based Monopoly ==> Competition Service ==> Commodity Consumer ==> Customer Privilege ==> Choice Engineers ==> Engineer + Lawyer/Manager + Finance Consultant

13. Horizontal Market Power Market power can sometimes lead to decreased prices in the long run Accompanying higher prices can result in a quickening of the entry of new players and technological innovation Some market power abuses are actually self-inflicted by consumers by their reluctance to respond to favorable prices offered by new vendors in deregulated markets

14. Symptoms of Market Power Economic theory tells us that in a market with perfect competition, prices should be equal to the marginal cost to supply the product Therefore prices above marginal cost can indicate market power

15. Market Power Analysis Market power analysis requires 3 steps identify relevant product/services identify relevant geographic market evaluate market concentration

16. Relevant Product FERC defines at least three distinct products non-firm energy short-term capacity (firm energy) long-term capacity Emphasis shifting to short-term energy markets Presentation considers short-term Challenge in electricity markets is “Demand varies over time”

17. Relevant Geographic Market Most difficult step in electricity market due to impact of transmission system Size of market is dependent on Competitive prices of generators Impacts of charges from transporting energy in transmission network Physical/operational characteristics of transmission network

19. Market Rules NGC works as ISO+PX. 48 half-hourly market. NGC uses GOAL (generation ordering and loading) program to determine the merit order of dispatching generation and reserve capacity. Generators must submit the bids by 10.00 AM one day ahead of operation. The “System Marginal Price” (SMP) is the price quoted by the most expensive generator which is accepted for dispatch during each half-hourly time slot when transmission constraints are ignored – simple unconstrained dispatch.

20. Capacity payments If marginal stations cannot cover their costs, then they will tend to shutdown, thus reducing the margin of capacity. Every MW of capacity which is declared available in a half-hour receives a capacity payment for that 1/2 hour, whether or not it is scheduled to generate. The probability that demand will exceed capacity (“Loss of Load probability”, or LOLP) is calculated by comparing expected demand with the capacity expected to be available. PPP = SMP+CC (= LOLP*(VOLL-SMP)) CC = LOLP*(VOLL-bid) if not generating

21. Capacity payments (Contd.) LOLP is calculated by a program based on Forecasted demand (& its variance) Disappearance ratio (probability that a genset was available at some point in 8-days become unavailable by the 9th day) Genset capacity available for last 8 days, LOLP is extremely sensitive to the level of capacity relative to demand. Capacity payments have been heavily criticized. VOLL (value of lost load) was set by Govt. ( 2/kWh in 1990 rose to 16.50).

22. This additional expense is passed on to consumers. On the other hand, some uneconomic generators who are not selected in the day-ahead market but are called upon to generate due to transmission constraints or other reasons, are paid their 'bid' price, which is higher than the prevailing Pool Purchase Price(PPP). This is, effectively, a payment for out of merit generator operation. Constrained-off costs, out of merit payments and several additional expenses such as transmission fixed charges, transmission losses, startup costs, and ancillary services charges are passed on to consumers in the uplift

23. The customer side of the market is simpler: all energy is purchased at the pool selling price (PSP). All of the extra costs of energy above the PPP are simply lumped together in “uplift” and spread over all kWh taken by customers through the calculation of a single half-hourly consumer price, the PSP. PSP=PPP+uplift Problems Pool rules Market power Metering Customer choice Price volatality

24. NETWORK CONGESTION When producer and consumer of electric energy desires to produce and consume energy in the amount that would cause transmission system to operate beyond its transfer limit , the system is said to be congested.

25. THREE METHODS TO TACKLE TRANSMISSION CONGESTION Price Area congestion management employed in Nordic pool (Norway, Sweden, Denmark and Finland). Available Transfer capability (ATC) based congestion management system employed in US. Optimal Power Flow (OPF) based congestion management system employed in UK.

26. PURPOSE OF ATC To deliver electric power reliably. To provide flexibility for changing system conditions. To give the indication about the additional amount of power transfer. To allow trading of electric power among systems.

27. AVAILABLE TRANSFER CAPABILITY(ATC) In broad terms, ATC is defined as the maximum amount of additional MW transfer possible between two parts of a power system. OR Mathematically, ATC is defined as the Total Transfer Capability (TTC) less the Transmission Reliability Margin (TRM), less the sum of existing transmission commitments and the Capacity Benefit Margin (CBM). ATC = TTC – TRM – “Existing TC(and CBM)”.

28. IMPORTANT DEFINITIONS Total Transfer Capability (TTC) is defined as the amount of electric power that can be transferred over the interconnected transmission network in a reliable manner under specified conditions. Transmission Reliability Margin (TRM) is defined as that amount of transmission transfer capability necessary to ensure that the interconnected transmission network is secure under a reasonable range of uncertainties in system conditions.

29. DEFINITIONS Capacity Benefit Margin (CBM) is defined as that amount of transmission transfer capability reserved by load serving entities to ensure access to generation from interconnected systems to meet generation reliability requirements. Recallability is defined as the right of a transmission provider to interrupt all or part of a transmission service for any reason, including economic, the transmission provider’s transmission service tariffs or contract provisions. Non-recallable ATC (NATC) is defined as TTC less TRM, less non-recallable reserved transmission service (including CBM).

30. Total Transfer Capability (TTC) Depends on: System Conditions. Critical Contingencies. Non-Simultaneous and Simultaneous Transfers. System Limits(Thermal, Stability and Voltage).

31. Transmission Reliability Margin (TRM) Depends on Uncertainty exists in future system topology, load demand and power transactions TRM is kind of a safety margin to ensure reliable system operation as system conditions change. TRM could be 8% or 10% of the TTC

32. Capacity Benefit Margin (CBM) Capacity Benefit Margin (CBM) is defined as that amount of transmission transfer capability reserved by load serving entities to ensure access to generation from interconnected systems to meet generation reliability requirements. Its use is intended only for the time of emergency generation deficiencies.

33. ATC

34. ADVANTAGES OF AVAILABLE TRANSFER CAPABILITY (ATC) METHOD ATCs produced by the calculations gives a reasonable and dependable indication of transfer capabilities available to the electric power market. ATC calculations produce commercially viable results. Regional or wide-area coordination is necessary to develop and post information that reasonably reflects the ATCs of the interconnected transmission network.

35. Transmission Reliability Margin (TRM) Capacity Benefit Margin (CBM) Available Transfer Capability (ATC) Total Transfer Capability (TTC) Existing Transfer Commitments (ETC) Basic definition of ATC

36. Transmission Loading Relief in Deregulated Power Systems To calculate the spot price, and carryout profit analysis of the power system under deregulated environment making use of the existing LP method of OPF at different loads. To find contingency ranking based on MVA loading of the transmission lines and to find ATC with contingencies. To define a secured transactional space, to perform the transactions between seller and buyer by use of updating ATC instead of off-line ATC.

37. Determination of Spot Price and required Power Production

38. METHODS FOR COMPUTATION OF TRANSFER CAPABILITY • Continuation Power Flow (CPF) method • Optimal Power Flow (OPF) method. • Repeated Power Flow (RPF) method. • LIMITS TO TRANSFER CAPABILITY • Thermal Limits • Voltage Limits • Stability Limits

39. Reactive power support in dpsm Real-time pricing approach : Is a Key Type Ancillary Service. Can provide economic information for system operation. However, it has several disadvantages in practical applications. In some cases, the real-time price is quite sensitive to the system constraints and operation conditions, which could lead to considerable price fluctuations. The real-time price is usually obtained from OPF based algorithms, which have convergence problems because of numerous nonlinear constraints

40. Reactive power support IN dpsm (Contd.) Cost allocation Approach :            Is a Key Type Ancillary Service.The principle of cost allocation methods is allocating the total cost of reactive power supply to each load. Traditional allocation method can also used in a reactive power cost allocation, such as postage stamp, contract path, and MW mile method. However, these methods are too rough and are not suitable in electrical market.           Several new style methods are proposed. A power flow tracing based cost allocation method for reactive power service has been proposed. The method provides useful information for reactive power planning and recover the reactive power production and transmission cost properly.

41. Voltage control voltage control         Is also a Key Type Ancillary Service. Voltage control is an important aspect of reactive power service. However, it isn’t considered in most pricing structures because of the difficulty to determine which part of reactive power is used for voltage control. Reactive power support of generators is defined into two functions: reactive power delivery and voltage control. Reactive power delivery satisfies reactive demands of loads, and voltage control enforces the voltage profile of the system under normal and emergence conditions. Both parts are charge independently. The reactive power services an decomposed into two types: one is voltage profile management and reactive dispatch; the other is voltage control

42. Queries ? CONTACT: subramanyamps@gmail.com

43. THANKYOU