Table Of ContentAdvances in Industrial Control
Springer-Verlag London Ltd.
Other titles published in this Series:
Modeling and Advanced Control for Proces Industries, Applications to Paper
Making Processes
Ming Rao, Qijun Xia and Yiquan Ying
Modelling and Simulation of Power Generation Plants
A.W. Ordys, A.W. Pike, M.A. Johnson, R.M. Katebi and M.J. Grimble
Model Predictive Control in the Process Industry
E.F. Camacho and C. Bordons
Hoo Aerospace Control Design: A VSTOL Flight Application
R.A. Hyde
Neural Network Engineering in Dynamic Control Systems
Edited by Kenneth Hunt, George Irwin and Kevin Warwick
Neuro-Control and its Applications
Sigeru Omatu, Marzuki Khalid and Rubiyah Yusof
Energy Efficient Train Control
P.G. Howlett and P.J. Pudney
Hierarchical Power Systems Control: Its Value in a Changing Industry
Marija D. Ilic and Shell Liu
System Identification and Robust Control
Steen T0ffner-Clausen
Genetic Algorithms for Control and Signal Processing
K.F. Man, K.S. Tang, S. Kwong and W.A. Halang
Advanced Control of Solar Plants
E.F. Camacho, M. Berenguel and F.R. Rubio
Control of Modern Integrated Power Systems
E. Mariani and S.S. Murthy
Advanced Load Dispatch for Power Systems: Principles, Practices and Economies
E. Mariani and S.S. Murthy
Supervision and Control for Industrial Processes
Björn Sohlberg
Modelling and Simulation of Human Behaviour in System Control
Pietro Carlo Cacciabue
Modelling and Identification in Robotics
Krzysztof Kozlowski
Spacecraft Navigation and Guidance
Maxwell Noton
Robust Estimation and Failure Detection
Rami Mangoubi
Adaptive Internal Model Control
Aniruddha Datta
Eric Allen and Marija Ilic
Price-Based
Commitment
Decisions in the
Electricity Market
With 43 Figures
Jp Springer
Dr. Eric Allen
New York Power Pool, 3890 Carman Road, Schenectady, NY 12303, USA
Dr.Marija Ilic
Dept. of Electical Engineering and Computer Science, M.I.T.,
77 Massachusetts Avenue, 10-059, Cambridge, MA 02139, U.S.A.
British Library Cataloguing in Publication Data
Allen, Eric
Price-based commitment decisions in the electricity market
1. Electric power - Economic aspects 2. Electric power
production - Economic aspects 3. Electric utilities -
Decision making
I. Title II. Ilic, Marija
333.7'9323
Library of Congress Cataloging-in-Publication Data
Allen, Eric, 1971-
Price-based commitment decisions in the electricity market / Eric
Allen and Marija Ilic.
P. cm — (Advances in industrial control)
Includes bibliographical references and index.
ISBN 978-1-4471-1162-7 ISBN 978-1-4471-0571-8 (eBook)
DOI 10.1007/978-1-4471-0571-8
1. Electric power — Purchasing — Decision making — Mathematical
models. 2. Electric utilities — Rates — Mathematical models.
I. Ilic, Marija D., 1951 - . II. Titel. III. Series.
HD9685.A2A46 1999 98-41453
333.793,2,0687—dc21 CIP
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as
permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced,
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publishers, or in the case of reprographic reproduction in accordance with the terms of licences issued
by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be
sent to the publishers.
© Springer-Verlag London 1999
Originally published by Springer-Verlag London Limited in 1999
The use of registered names, trademarks, etc. in this publication does not imply, even in the absence of a
specific statement, that such names are exempt from the relevant laws and regulations and therefore
free for general use.
The publisher makes no representation, express or implied, with regard to the accuracy of the
information contained in this book and cannot accept any legal responsibility or liability for any errors
or omissions that may be made.
Typesetting: Camera ready by authors
69/3830-543210 Printed on acid-free paper
Advances in Industrial Control
Series Editors
Professor Michael J. Grimble, Professor ofIndustrial Systems and Director
Professor. Michael A. Johnson, Professor in Control Systems and Deputy Director
Industrial Control Centre
Department of Electronic and Electrical Engineering
University of Strathclyde
Graham Hills Building
50 George Street
GlasgowG11QE
United Kingdom
Series Advisory Board
Professor Dr-Ing J. Ackermann
DLR Institut fUr Robotik und Systemdynamik
Postfach 1116
D82230 Weming
Germany
Professor J.D. Landau
Laboratoire d'Automatique de Grenoble
ENSIEG, BP 46
38402 Saint Martin d'Heres
France
Dr D.C. McFarlane
Department of Engineering
University of Cambridge
Cambridge CB2 1QJ
United Kingdom
Professor B. Wittenmark
Department of Automatic Control
Lund Institute of Technology
PO Box 118
S-221 00 Lund
Sweden
Professor D.W. Clarke
Department of Engineering Science
University of Oxford
Parks Road
Oxford OX1 3PJ
United Kingdom
Professor Dr -Ing M. Thoma
Westermannweg 7
40419 Hannover
Germany
Professor H. Kimura
Department of Mathematical Engineering and Information Physics
Faculty of Engineering
The University of Tokyo
7-3-1 Hongo
Bunkyo Ku
Tokyo 113
Japan
Professor A.J. Laub
College of Engineering -Dean's Office
University of California
One Shields Avenue
Davis
California 95616-5294
United States of America
Professor J.B. Moore
Department of Systems Engineering
The Australian National University
Research School of Physical Sciences
GPO Box4
Canberra
ACT 2601
Australia
Dr M.K. Masten
Texas Instruments
2309 N orthcrest
Plano
TX 75075
United States of America
Professor Ton Backx
AspenTech Europe B.V.
DeWaal32
NL-5684 PH Best
The Netherlands
Dedicated to my parents,
Owen and Candace,
my family, and God,
for their love and support.
E.H.A.
To my troubled
homeland.
With faith, love,
and hope.
M.D.1.
SERIES EDITORS' FOREWORD
The series Advances in Industrial Control aims to report and encourage technology
transfer in control engineering. The rapid development of control technology
impacts all areas of the control discipline. New theory, new controllers, actuators,
sensors, new industrial processes, computer methods, new applications, new
philosophies ... , new challenges. Much of this development work resides in
industrial reports, feasibility study papers and the reports of advanced
collaborative projects. The series offers an opportunity for researchers to present
an extended exposition of such new work in all aspects of industrial control for
wider and rapid dissemination.
Deregulation of electricity markets is a worldwide activity with leading and
distinctive developments occurring in the European and US markets. The
immediate impact of these changes is felt in the higher levels of the power
production hierarchy where tools to aid short-term economic decision making are
needed. At the lower levels of the production control hierarchy the impact is to
demand much more flexible unit operation so that the determined short-term
goals can be met. Allen and Illic have produced this useful monograph on the
decision algorithms needed to determine unit commitment proflles over the
shorter time frame of hours and days. The method of dynamic programming has
been used and the work covers modelling, cost function and construction, an
introduction to dynamic programming and a detailed assessment of its use. The
monograph comes complete with programs in Appendix D and with other
appendices giving the necessary supporting theory. The research community in
power systems engineering should find this comprehensive presentation an
extremely valuable feature of the monograph, and it is a welcome addition to the
Advances in Industrial Control Series.
M.J. Grimble and M.A. Johnson
Industrial Control Centre
Glasgow, Scotland, UK
PREFACE
The purpose of writing this book is two-fold: First, the book reports dynamic
programming-based methods for distributed decision-making under uncer
tainties. In particular, the type of decisions of interest are on-off, rather than
continuous. The overall objective is to optimize expected performance; this is
done in an intelligent way, since the strategy is changing as more knowledge
is gained in real-time about the uncertainties. The decision-making described
here is typical of distributed controllers in a large-scale complex system, and
reflects the self-adjusting and self-optimizing processes of the distributed de
cision makers to the uncertainties created somewhere else on the system.
Assumptions typically made about the nature of uncertainties are relaxed;
instead, major uncertainties become state variables themselves whose mod
els are developed and used in the dynamic programming formulation of the
problem.
Secondly, solving these theoretical problems is essential for successful
decision-making for selling and/or buying products competitively in physical
and financial markets. Physical markets are particularly challenging where
the inter-temporal effects playa dominant role; for example, an electric power
plant could optimize its profit by maximizing its revenue, which requires sell
ing when the price of electricity is high, and by minimizing the total operating
cost of delivering the committed power by taking into consideration startup
and shutdown costs and must-run time constraints.
As the electric power industry evolves from being a fully regulated, cost
based industry into functionally and corporately separate generation, trans
mission and distribution entities, it becomes essential to bid intelligently into
short-term (daily) physical electricity markets as well as longer-term financial
markets (such as the 18 month futures market). The supply/demand aspect
of the deregulated industry is becoming fully competitive and, as such, re
quires commitment decision methods similar to the methods used in other
competitive industries. This is a significant change compared to the coordi
nated least-cost scheduling of generation done in today's industry. Instead,
the decisions are motivated by the individual profit/benefit maximization
criteria for the anticipated market conditions.
xii Preface
Depending on the specific electricity market structure in place, the obli
gation to supply sufficient power so that the expected demand is fully met
is not an explicit constraint. The excess demand leads to the increase in
the price of electricity, and this has a self-regulating effect likely to ensure
that sufficient supply is committed to meet the required demand. Dynamic
efficiency, measured in terms of total social welfare over a finite time, is also
optimized through the distributed decision-making described here.
This book concerns only tools for the newly evolving electric power in
dustry directly relevant for decision-making by suppliers and consumers of
electricity. It does not concern real-time operations and planning of the trans
mission and distribution systems necessary to facilitate power transactions
between sellers and buyers. As such, the methods described in this book
should be of direct interest to future generation companies - GENCo's-,
load serving entities - LSEs- and, more generally, power marketers.
The book describes basic methods for the intelligent selling and buying of
electricity so that power producers and consumers optimize their individual
profits. At the same time, assuming no market power problems, it can be
shown that these decentralized decision-making methods lead to near-optimal
systemwide efficiency of the electricity market, in which total expected social
welfare is maximized. This is the essence of competitive economics, and
the methods developed in this book provide basic formulations for decision
making by future GENCo's and LSEs in the competitive electricity markets.
