APPLICATION OF OPTIMIZATION TECHNIQUES IN DEREGULATED MARKET

Dr. R. GNANADASS, BOYSCAST Fellow Assistant Professor, EEE Department Pondicherry Engineering College, PUDUCHERRY 605 014 E-Mail gnanadass@yahoo.com The objective of this lecture is to explore the applications of the Artificial Intelligence techniques to solve the technical challenges of deregulated power industry. 1.1. INTRODUCTION

Throughout the world, electric power utilities are currently undergoing major restructuring process and are adopting the deregulated market operation. Competition has been introduced in power systems around the world based on the promise that it will increase the efficiency of the industrial sector and reduce the cost of electrical energy of all customers. Electrical energy could not be stored in large quantities. Continuity of supply is sought as more important than the cost of the electrical energy. To meet the growing power demand, electric power industry has to adopt the deregulated structure. For integrated operation of deregulated system, regulating agencies such as pool operator or system operator have to be formulated. In the deregulated power market, the electricity is dispatched with the help of either by a separate power exchange or the system / pool operator. The power system deregulation is expected to offer the benefit of lower electricity price, better consumer service and improved system efficiency. However, it poses several technical challenges with respect to its conceptualization and integrated operation. Basic issues of ensuring economical, secured and stable operation of the power system, which can deliver the power at desired quality, has to be addressed carefully in a deregulated market. The complexity is more in such an arrangement. Power systems, all over the world, have been forced to operate to their full capacities due to the environmental and / or economical constraints. This results in the need of new generation centers and transmission lines. The amount of electric power that can be transmitted between two locations through a transmission network is also limited by security constraints. Power flows should not be allowed to increase to a level where a random event could cause the network to collapse due to overloading, angular instability, voltages instability or cascaded outages. This state of the system is called as congestion of the power system. Managing congestion to minimize the restrictions of the transmission network becomes the central activity of power system operators in recent years.

2 The deregulation of the electric utility industry allows many independent power producers (IPP) to be connected across the transmission system. This situation also calls for effective methods to ensure the transmission system reliability, while the power is transferred through the network. In a deregulated environment, there are many simultaneous bilateral and multilateral transactions in addition to power pooling. Therefore, it is very much important that sellers and buyers of electricity need to find the cost allocation to their wheeling transactions. Independent System Operator (ISO), a supreme entity for the control of transmission system, also needs to know such costs in order to make correct economic and engineering decisions on upgrading the transmission facilities. So wheeling is currently a high priority problem in both regulated and deregulated power industries. Transmission Open Access (TOA) is an important step for the translation of conventional power systems to a deregulated power system. It consists of the regulatory structure, which includes transmission right, obligations, operational procedures and economic conditions of the system and enables two or more parties to use the transmission network for electricity power transfer of another party. This concept is gaining deep attention which desire to introduce competition into traditional regulated utilities without giving up their existing regulatory structure. Such a deregulated system study is carried out in the present thesis work. Before entering into the details of the work, important terms used have been explained in the following section. 1.2. DEREGULATION IN POWER INDUSTRY

The driving force behind the development of power systems is the growing demand for electrical energy in developing countries. The energy demand will be the greatest in the near future. As energy demand continues to grow, higher voltage levels are needed. In the beginning, A.C. transmission has to transfer power over long distances. In such transmission, technical problems such as voltage control and dynamic stability will arise. This involves in heavy pricing over the customer. The deregulated power system is to give opportunity to the customer to buy energy at a more favorable price. The electric supply industry in every country for about the last one hundred years has been a natural monopoly and as a monopoly attracted regulation by government. Without exception, the industry has been operated as a vertically integrated monopoly organization that owned the generation, transmission and distribution facilities. It was also a local monopoly, in the sense that in any area one company or government agency sold electric power and services to all customers. The major difference between conventional monopolistic electricity market and the emerging deregulated market is that electricity in the former case is considered as merely energy supply sector, whereas in the latter case it is treated as a service sector and is to be marketed like any other common commodity. In a monopolistic market, the same agency is responsible for power generation, transportation, distribution as well as control, whereas in the new market structure these tasks are segregated and have to be separately paid by the transacting parties. In the conventional market, the single utility is responsible for maintaining physical flow of electricity, satisfying consumers demands at proper voltage and frequency level, maintaining security, economy and reliability of the system. In the new

3 deregulated electricity market, many of these tasks are treated as separate services, in addition to the primary task of the system operator and wire companies to ensure meeting the power transactions all the time. The additional services include arranging power for the loss makeup or load following, maintaining the system frequency, providing enough voltage / VAR support, arranging for start-up power, spinning reserve in the system etc. These are called ancillary services in the deregulated environment and have to be arranged and paid separately. Some of these ancillary services can directly be arranged by the seller / buyers of electricity. In addition, the transmission of electricity itself will be treated as a separate service and has to be changed from the transacting parties and paid to the wire companies. 1.2.1. Motivations for Deregulated Power Industry Since the 1980s, the electricity supply industry has been undergoing rapid and irreversible changes reshaping the industry that is remarkably stable and served the public well. A significant feature of these changes is that it allows for competition among generators and create market conditions in the industry, which are seen as necessary to reduce costs of energy production and distribution, eliminate certain inefficiencies, shed manpower and increase customer choice. This transition towards a deregulated power market is commonly referred to as electricity supply industry restructuring or deregulation. South American countries, such as Argentina and Chile, were the first few to introduce deregulated market of electricity in the mid-eighties followed by U.K., Scandivinian countries and the USA in the 1990s, where it is now fully operational. Some of the Asian countries, including India, have already taken initial steps in this direction. In India, a limited level of competition is already introduced at generation level by allowing participation of Independent Power Producers (IPPs). In addition, separation of three organs of power system i.e. generation, transmission and distribution has already been done in a few states. Shortly most of the power utilities in the country will be adopting the deregulated structure in some sense. Further, the regulatory bodies have been formed at central level and also at some of the states. Their primary function, at present, is to fix tariff for power sales. Many factors such as technology advances, changes in political and ideological attitudes, regulatory failures, high tariffs, managerial inadequacy, global financial drives, the rise of environmentalism, and the shortage of public resources for investment in developing countries, contributed to the worldwide trend towards deregulation. 1.2.2. Open Transmission System Operation There are many variations in the deregulated scenarios for electric power systems around the world. Accordingly, there exist different schemes for operation and regulating access to transmission systems. The differences may be due to historical, political, geographical or economic factors, specific to each country or area. However, each deregulated scheme must address the fundamental technical issues associated with the properly operating open transmission network. Some of the following potential technical problems before open power market are to be handled carefully.

4 Available Transfer Capability. Pricing. Congestion management. Security. Economy and environment.

The detailed literature survey of the above technical problems is given in the following section. I. Optimal Power Flow [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] Dommel H., and Tinney W.F.,Optimal power flow Solutions, IEEE Transactions on Power Apparatus and Systems, Vol.87, No.10, October 1968, pp.1866-1876. Abido M.A., Optimal power flow using Tabu Search algorithm, Electric Power Components and Systems, Vol.30, No.5, 2002, pp. 469-483. Alsac O., and Stott B.,Optimal Load flow with Steady state security, IEEE Transactions on Power Apparatus and Systems, Vol. PAS-93, No.3, 1974, pp.745-751. Bakirtzis Anastasios G., Pandel N., Biskas, Zoumas Christoforos E., and Petridis Vasilios,Optimal power flow by enhanced genetic algorithm, IEEE Transactions on Power Systems, Vol.17, No.2, May 2002, pp.229-236. Baskar S., Subbaraj P., and Rao M.V.C., Hybrid Genetic Algorithm Solution to economic dispatch problem with multiple fuel options, Journal of Institution of Engineers (India), Vol.82, 2001, pp.177-183. Basu M.,Fuel constrained Economic Emission Dispatch using Hopfield Neural Networks, Electric Power Systems Research, Vol.63, No.1, 2002, pp. 51-57. Burchett R.C., Happ H.H., and Vierath D.R.,Quadratically Convergent Optimal Power Flow, IEEE Transactions on Power Apparatus and Systems, Vol.103, No.11, November 1984, pp.3267-3276. Chung T.S., and Li Y.Z.,A Hybrid GA approach for OPF with consideration of FACTS devices, IEEE Power Engineering Review, February 2001, pp.47-50. Divi R., and Kesavan H.K.,A Shifted penalty function approach for Optimal Power Flow, IEEE Transactions on Systems, Man and Cybernetics, Vol.4, No.2, August 1982, pp.765-773. Gent M.R., and Lamont John Wm.,Minimum Emission Dispatch, IEEE Transactions on Power Apparatus and Systems, Vol.90, 1971, pp.2650-2660. Gnanadass R., Manivannan K., and Venkatesh P.,Evolutionary programming based economic load dispatch with combined cycle co-generation effect, Proceedings of 37th International Universities Power Engineering Conference, Staffordshire university, U.K., 9-11th Sep. 2002.

5 [12] [13] [14] [15] [16] Hota P.K., Chakrabarti R., and Chattopadhyay P.K.,. Economic Emission load dispatch with line flow constraints using Sequential quadratic programming technique, Institution of Engineers (India) Vol.81, 2000, pp.21 25. Jayabarathi T., Sadasivam G., Evolutionary Programming-Based Economic Dispatch for units with Multiple Fuel Options, European Transactions on Electrical Power, Vol.10, No.3, 2000, pp. 167-170. Kulkarni P.S., Kothari A.G., and Kothari D.P., Combined Economic and Emission dispatch using improved back propagation Neural Network, Electric Machines and Power Systems,Vol.28, 2000, pp.31-44. Lai L.L., and Ma J.J., Application of Evolutionary Programming to Reactive Power Planning Comparison with Non-Linear Programming Approach, IEEE Transactions on Power Systems, Vol.12, No.1, 1997, pp.198-207. Lee K.Y., and Yang F.F., Optimal Reactive Power Planning using Evolutionary Algorithms: A comparative study for evolutionary programming, Evolutionary Strategy, Genetic Algorithm, and linear programming, IEEE Transactions on Power Systems, Vol.13, No.1, 1998, pp.101-108. Lee K.Y., Yome A.S., and Park J.H., Adaptive Hopfield neural networks for economic load dispatch IEEE Transactions on Power Systems, Vol.13, No.2, 1998, pp. 519-526. Lee S.C., and Kim Y.H.,An enhanced lagrangian neural network for the ELD problems with piecewise quadratic cost functions and non linear constraints, Electrical Power System Research, Vol.60, No.3, 2002, pp.167-177. Nanda J., Hari L., and Kothari M.L., Economic emission load dispatch with line flow constraints using a Classical technique, IEE Proceedings, Pt.C., Vol.141, No.1, 1994, pp.1- 10. Nanda J., Kothari D.P., and Srivastava S.C., New Optimal Power-dispatch algorithm using Fletchers quadratic programming method, IEE Proceedings, Pt.C., Vol.136, No.3, 1989, pp.153-161. Paranjothi S.R.,and Anburaja K.,Optimal power flow using refined Genetic Algorithm, Electric Power Components and Systems, Vol.30, 2002, pp.10551063. Venkatesh P., Gnanadass R., and Narayana Prasad Padhy,Comparison and application of Evolutionary Programming techniques to Combined Economic Emission Dispatch with Line Flow constraints, IEEE Transactions on Power Systems, Vol.18, No.2, 2003, pp. 688-697. Yuryevich J., and Wong K.P., Evolutionary Programming based Optimal Power Flow, IEEE Transactions on Power Systems, Vol.14, No.4, 1999, pp.1245 1250. M. Anitha, S. Subramanian and R. Gnanadass, FDR PSO based Transient stability constrained Optimal Power Flow solution for Deregulated Power Industry, International Journal of Electric Power Components and Systems, Vol. 35, No. 11, November 2007, pp. 1219-1232.

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II. Deregulation Books

6 [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] Lai Loi Lai,Power System Restructuring and Deregulation, Publisher: John Wiley and Sons Ltd., New York, 2001. Marija Ilic., Galiana F., and Fink L.,Power System Restructuring: Engineering and Economics, Publisher: Kluwer Academic, Boston, MA, 1998. Philipson Lorrin and Willis H. Lee,Understanding Electric Utilities and Deregulation, Publisher: Marcel Dekker Inc., New York, 1999. Schweppe F.C., Caramanics M.C., Tabors R.D., and Bohn R.E.,Spot Pricing of Electricity, Publisher: Kluwer Academic, Boston, MA, 1998. Steven Stoft, Power System Economics, Publisher: John Wiley & Sons, 2000. Shahidehpour M., Almomoush M., Restructured Electrical Power Systems, Publisher: Marcel Dekker, Inc., 2001. Kankar Bhattacharya, Math H.J. Bollen and Jaap E. Daalder, Operation of Restructured Power Systems, Publisher: Kluwer Academic Publishers, 2001. Daniel S. Kirschen and Goran Strbac, Power System Economics, Publisher: John Wiley & Sons, Ltd, 2004. S. A. Khaparde and A. R. Abhyankar, Restructured Power Systems, Publisher: Narosa Publishing House (in Press), New Delhi, India. S. C. Srivastava and S. N. Singh, Operation and Management of Power system in Electricity Market, Publisher: Narosa Publishing House (in Press), New Delhi, India. Deregulation in Various Countries Amelink H.,Utility Restructuring in the USA: Issues and Concerns, First AsiaPacific Conference on Operations and Planning Issues in the Emerging Electric Utility Environment, Kuala Lumpur, Malaysia, August 11-14, 1997. Chaube K.S., Restructuring of the Power Supply industry in India, Cigre Regional Meeting, November 8-10, 2001 in New Delhi, INDIA. Hugh Rudnick, Planning in a Deregulated Environment in Developing Countries: Bolivia, Chile, Peru, IEEE Power Engineering Review, Vol.16, No.7, 1996, pp.18-19. Hugh Rudnick,Latin American Deregulation Process, IEEE Power Engineering Review, December 1998, pp.10-23. Lamoureux Marcel A.,Evolution of Electric Utility Restructuring in the UK, IEEE Power Engineering Review, June 2001, pp.3-9. Outhred H.,A Review of Electricity Industry Restructuring in Australia, Electric Power Systems Research, Vol.44, 1998, pp.15-25. Palanichamy C., Babu N.S., and Nadarajan C.,Privatizing and Restructuring the Indian Power Sector an Overview, Journal of Institution of Engineers (India) Transactions, Vol.80, May 1999, pp.23-30. Rudnick H., Pioneering Electricity Reform in South America, IEEE Spectrum, Vol.33, No.8, 1996, pp.38-44. Rudnick H.,Latin American deregulation process, IEEE Power Engineering Review, December 1998, pp.10-23.

III.

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7 [44] [45] [46] [47] Singh S.N., and David A.K.,Electricity Supply Industry Restructuring: International Experiences, Proceedings of Third International Conference, CBIP, 29th February 3rd March 2000, Jabalpur, India. Srivastava A., and Shahidehpour M.,Restructuring Choices for the Indian Power Sector, IEEE Power Engineering Review, November 2002, pp.25-29. Tabors R.D., Lessons from the UK and Norway, IEEE Spectrum, Vol.33, No.8, 1996, pp.45-49. Yog Raj Sood, Narayana Prasad Padhy and Gupta H.O.,Wheeling of power under deregulated environment of power system A bibliographical survey, IEEE Transactions on Power systems, Vol.17, No.3, 2002, pp. 870-878.

IV. Available Transfer Capability [48] [49] [50] [51] North American Electric Reliability Council (NERC), Available Transfer Capability Definitions and Determination, NERC Report, June 1996. Feng Xia and A.P. Sakis Meliopoulos, A methodology for probabilistic Simultaneous Transfer Capability Analysis, IEEE Transactions on Power Systems, Vol.11, No.3, 1996, pp.1269-1278. Gabriel C. Ejebe, James G. Waight, Manuel Santos-Nieto, William F. Tinney, Fast Calculation of Linear Available Capability, IEEE Transactions on Power Systems, Vol.15, No.3, 2000, pp.1112-1116. Gnanadass R., Narayana Prasad Padhy and Manivannan K.,Assessment of Available Transfer Capability for Practical Power Systems with Combined Economic Emission Dispatch Electric Power Systems Research, Vol. 69, No.2-3, May 2004, pp. 267-276. Gravener M.H., and Nwankpa C.,Available Transfer Capability and First order Sensitivity, IEEE Transactions on Power Systems, Vol.14, No.2, May 1999, pp.512-518. Hamoud G.,Assessment of Available Transfer Capability of Transmission Systems,IEEE Transactions on Power Systems, Vol.15, No.1, 2000, pp.27-32. Hiskens I.A., Pai M.A., and Sauer P.W.,Dynamic ATC, IEEE Power Engineering Society Winter Meeting, 2000, pp.1629. Ilic D.M., Yoon Y.T., and Zobian A.,Available Transfer Capacity and its value under Open Access, IEEE Transactions on Power Systems, Vol.12, No.2, May 1997, pp.636-645. Tinney W.F., Wang X., Frame J.G., Waight J.G., Tong J., and Ejebe G.C., Available Transfer capability Calculations, IEEE Transactions on Power Systems, Vol.13, No.4, 1998, pp.1521-1527. Transmission Transfer Capability, A Reference Document for calculating and reporting the Electric Power Transmission Capacity of interconnected electric systems, North American Electric Reliability Council, May 1995. Yan-Ou and Chanan Singh, Assessment of Available Transfer Capability and Margins, IEEE Transactions on Power Systems, Vol.17, No.2, 2002, pp. 463-468. P. Venkatesh, R. Gnanadass and Narayana Prasad Padhy, Available Transfer Capability Determination using Power Transfer Distribution Factors

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8 International Journal on Emerging Electric Power Systems, Vol.1, No.2, December 2004, Article 1009, pp.1-14. R. Gnanadass and Narayana Prasad Padhy, Assessment of Dynamic Available Transfer Capability for Deregulated Power Industry, International Journal on Global Energy Issues, Vol. 31, No.1, 2009, pp. 18 31.

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V. Transmission Pricing [61] [62] [63] [64] [65] [66] Burchett R.C., Happ H.H., and Vierath D.R.,Quadratically Convergent Optimal Power Flow, IEEE Transactions on Power Apparatus and Systems, Vol.103, No.11, November 1984, pp.3267-3276. David A.K.,Optimal customer response for Electricity Spot Pricing, IEE Proceedings, Pt.C., Vol.135, No.5, September 1988, pp.378-384. Ejebe G.C., Tong J., Waight J.G., Frame J.G., Wang X., and Tinney W.F., Available Transfer Capability Calculation, IEEE Transactions on Power Systems, Vol.13, No.4, November 1998, pp.1521-1527. Happ H.H.,Cost of Wheeling Methodologies, IEEE Transactions on Power Systems, Vol.9, No.1, February 1994, pp.147-156. Schweppe F.C., Caramanis C., and Tabors R.D.,Evaluation of Spot Price based Electricity rates, IEEE Transactions on Power Apparatus and Systems, Vol.104, No.7, July 1985, pp.1644-1655. Ya-Chin Chang and Chun-Lien Su,MVA Based Transmission Supplement Cost Allocation, IEEE/PES Transmission and Distribution Conference and Exhibition: Asia Pacific held at Yokohama, Japan, October 6-10, 2002, pp. 2002-2006. R. Gnanadass and Narayana Prasad Padhy, A New Method for Transmission Embedded Cost Allocation in Restructured Power Market International Journal on Energy & Environment, Vol.4, May 2005, pp. 37-48. R. Gnanadass, Narayana Prasad Padhy and T.G. Palanivelu, Determination of SRMC for Practical Power Systems with Non-Smooth Fuel Cost Functions, Journal of The Institution of Engineers (India), Vol.86, December 2005, pp. 180184.

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VI. Congestion Management [69] [70] [71] Alomoush M.I., Shahidehpour S.M.,Contingency-constrained Congestion Management with a Minimum number of adjustments in Preferred Schedules, Electrical Power & Energy Systems, Vol.22, 2000, pp.277-290. Ashwani Kumar, Srivastava S.C., and Singh S.N.,A Zonal Congestion Management Approach using Real and Reactive Power Rescheduling, IEEE Transactions on Power Systems, Vol.19, No. 1, February 2004, pp.554-562. Chien-Ning Yu and M. Ilic,Congestion clusters-based Markets for Transmission Management Proceeding of IEEE Power Engineering Society Winter Meeting, New York, January 1999, pp.1-11.

9 [72] [73] [74] [75] [76] [77] [78] Christie R.D., Wollenberg B.F., and Wangensteen I.,Transmission Management in the Deregulated Environment, Proceedings of IEEE, Vol. 88, No.2, February 2000, pp.170-195. David A.K., and Fang R.S.,Congestion Management of Electric Power System under Open transmission access, Proceedings of the IEE Conference on APSCOM, 1997, pp.469-474. Fang R.S., and David A.K.,Transmission Congestion Management in an Electricity Market, IEEE Transactions on Power Systems, Vol. 14, No.3, August 1999, pp. 877-883. Galtvitsch H., and Alvarado F.,Management of Multiple Congested conditions in unbundled operation of a power system, IEEE Transactions on Power Systems, Vol.13, No.3, August 1998, pp. 1013-1019. Harry Singh, Shangyou Hao and Alex Papalexopoulos,Transmission Congestion Management in Competitive Electricity Market, IEEE Transactions on Power Systems, Vol.13, No.2, May 1998, pp.672-680. Yamina H.Y., and Shahidehpour S.M.,Congestion Management Coordination in the Deregulated Power Market, Electric Power Systems Research, Vol.65, 2003, pp.119-127. Ashwani Kumar, SN Singh and SC Srivastava, Congestion Management in Competitive Power Market: A Bibliographical Survey, Electric Power Systems Research, Vol. 76, No. 1-3, pp 153-164, 2005. Relevant Websites United States ISO United States ISO United States ISO United States ISO - United Kingdom ISO Australian ISO European ISO (International) Newzeland ISO Indian Power Exchange

VII.

www.pjm.com www.nyiso.com www.caiso.com www.midwestiso.org www.nationalgrid.com www.Nemmco.com.au www.nordpool.no www.transpower.co.nz www.iexindia.org

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