Markets and Demand Management Coupling with Renewable Energy Sources Alberto J. Lamadrid Eighth Annual Carnegie Mellon Conference on the Electricity Industry, 2012 CMU, Pittsburgh, March 14th 2012 A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 1 Outline 1 Motivation 2 Theoretical Model 3 Model Calibration 4 Cases and results A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 2 Motivation What is the cost of network congestion? New York State Congestion by Zone, NYISO 3000 2500 Nominal $M 2000 1500 1000 500 0 2007 2008 2009 2010 Year West Genesee Central North Mohawk Valley Hudson Valley Millwood Dunwoodie NY City Long Island Capital [nyiso(2011)] 2011 Congestion Assessment and Resource Integration Study (CARIS) Four metrics used: Bid- Production Cost (BPC) as primary metric, then Load Payments , Generator Payments, and Congestion Payments. A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 3 Motivation Relevance This research addresses a fundamental issue in the operation of the system with storage resources 1 2 3 4 How to securely dispatch a set of previously committed generators The use of inter-temporal resources for both time arbitrage and uncertainty mitigation Point of view of ISO (social planner), maximizing social welfare Research combines engineering, economic models, and knowledge of system constraints to identify solutions for better renewable integration Ongoing research at Cornell, Tim Mount, Dick Schuler, Bob Thomas, Ray Zimmerman, Carlos E. Murillo-Sanchez, Lindsay Anderson, support provided by PSERC A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 4 Theoretical Model Where does this research stand? Literature Electricity Markets [Harvey and Hogan(2002)]: bidding behavior in California crisis [Kamat and Oren(2004)]: two settlement markets and contract formation [Joskow and Tirole(2007)]: Model for demand management with heterogeneous consumers [Wolak(2007)]: complex bids, ramping costs [Mansur(2008)]: Cournot competition and supply in PJM Optimal ESS Management [Pindyck(1991)]: Stochastic control [Sioshansi and Denholm(2010)]: Ancillary services from PHEV’s Capital Good Replacement [Rust(1987)]: replacement of goods [Shiau, Samaras, Hauffe, and Michalek(2009)]: deterioration of batteries for V2G services t A.J. Lamadrid (Cornell University) Electricity Markets Engineering Models 2012 57 / 64 Co-optimizing energy and reserves → solve optimal amounts Use of Full AC Network Economic management of demand (deferrable) Modeling of renewables uncertainty • t Network Model [Carpentier(1962)]: optimal power flow formulation [Outhred(1998)]: Australian Market design, ancillary services [Zhang, Wang, and Luh(2000)]: dispatch of generators with ramping constraints [Chen, Mount, Thorp, and Thomas(2005)]: Co-optimization [Condren, Gedra, and Damrongkulkamjorn(2006)]: management of uncertainty (contingecies) [Tuohy, Meibom, Denny, and O’Malley(2009)]: Montecarlo approach Regulatory [USCongress(2005)]: Electricity Modernization Act of 2005 [NERC(2011)]: set of reliability standards Engineering and Economical modeling of Energy Storage Systems (ESS) Back A.J. Lamadrid (Cornell University) Electricity Markets 2012 58 / 64 Full Literature A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 5 Theoretical Model A Multiperiod, Security Constrained Optimal Power Flow Determining the optimal power flows for operations and planning on an AC network using Kirchhoff’s Laws. Traditional Approach Our Approach Break into manageable sub-problems. Simultaneous co-optimization with explicit contingencies and load following requirements Sequential optimization using proxy constraints Combine into single mathematical programming framework. DC approximations AC Network and Dispatch coordination Scheme Inter-temporal Constraints in UC model Explicit Inter-temporal constraints for generators AND Energy Storage Systems (ESS) misleading prices more accurate prices A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 6 Theoretical Model Overall Characteristics Power (MW) MW injections pi3 upward reserve pi1 p+ i3 p+ i1 pi0 p+ i0 p− ik pik 2 physical ramp down limit downward reserve pi2 1 pci rP−i p− i2 0 physical ramp up limit rP+i 3 k central “high-probability” path load following ramp up capacity load following ramp down capacity t contingencies t+1 t+2 t+3 t+4 time Stored Energy MWh st+4 + smax st+2 + st+3 + st+1 + S1(1) p11(1) S1(2) p12(1) S2(1) S2(2) S4(1) p14(1) S1(3) st+ P12(3) p13(1) S3(1) P11(2) S2(3) S2(24) S3(3) S3(24) S4(3) S4(24) P13(2) S3(2) S4(2) A.J. Lamadrid (Cornell University) P14(2) st+1 − st− st+2 − st+3 − st+4 − smin t t+1 Demand Management and Transmission t+2 t+3 t+4 time March 14 2012 7 Theoretical Model Simplified objective function and eq. constraints Objective: XXX min Gitsk ,Ritsk ,LNSjtsk πtsk nXh CGi (Gitsk )+ t∈T s∈S t k∈K + i∈I − + Incits (Gitsk − Gitc ) X + Decits (Gitc − Gitsk ) VOLLj LNS(Gtsk , Rtsk )jtsk + i o + j∈J (1) X X ρt t∈T + − + + i∈I − − CL (Lit )+] it ++ X t∈T − + [CR (Rit ) + CR (Rit ) + CL (Lit )+ it it it + Rpit (Gits2 − Gits ) 1 + ρt X X X s2 ∈S t s1 ∈S t−1 i∈I ts2 0 − + Rpit (Gits − Gits1 ) 2 + Subject to meeting demand and all network constraints (e.g. Active power flow equations) pit − X h i |vjt ||vit | Gijt cos(θi − θj ) + Bijt sin(θi − θj ) = 0, ∀i ∈ B, t ∈ T j∈nB A.J. Lamadrid (Cornell University) Nomenclature and Constraints Demand Management and Transmission March 14 2012 8 Model Calibration Input Information 1 2 3 4 PCA on historical data to determine wind sites [NREL(2010)] k-means clustering to specify the scenarios for the day[Guojun Gan(2007)] Data from New York and New England to calibrate load profile [NYISO(2011)] Network based on [Allen, Lang, and Ilic(2008)], heavily modified A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 9 Model Calibration North East Test network No changes in generation/load out of NY-NE A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 10 Model Calibration Geographical Location Details Fleet A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 11 Cases and results Cases studied Main Cases Studied 1 Case 1: Base Case, no wind 2 Case 2: Wind added in 16 locations in NYNE 3 Case 3: Wind + Deferrable Demand (DD). 4 Case 4: Wind Collocated with Storage Details Location A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 12 Cases and results How Deferrable Demand is Calculated Load Profile Shift, Millbury Bus (71797) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Final Load A.J. Lamadrid (Cornell University) ESS contribution Demand Management and Transmission March 14 2012 13 Cases and results Payments in the System 14 x 10 Composition of payments in the Wholesale Market 7 Operating Costs Ramping Costs Generators Net Revenue Congestion Rents 12 Daily Cost ($) 10 8 6 4 2 0 1 2 3 4 Case A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 14 Cases and results Expected Dispatch per Case Cases 3 and 4 Expected Dispatch per Fuel Type 4 6 x 10 x 10 5 4 Nuclear Hydro Coal NG Oil Wind ESS 3 2 1 E[Dispatch] per fuel type, MW E[Dispatch] per fuel type, MW 5 0 Expected Dispatch per Fuel Type 4 6 4 Nuclear Hydro Coal NG Oil Wind ESS 3 2 1 2 4 6 8 10 12 14 16 18 20 22 24 0 2 4 Hour h=7 h = 19 6 8 10 12 14 16 18 20 22 24 Hour h=6 h=7 h = 19 h=6 Dispatch 1 and 2 A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 15 Cases and results Wind Compensation Income for All Wind Generators 5 x 10 7 Case 2 Case 3 Case 4 6 Pmt. to Wind for Pg $ 5 4 3 2 1 2 8 4 10 6 12 8 14 10 16 12 Hour 14 20 16 18 22 20 22 24 2 4 6 24 Total Wind Compensation (USD Millions) A.J. Lamadrid (Cornell University) Case 2 Case 3 Case 4 10.112 12.262 12.094 Demand Management and Transmission March 14 2012 16 Cases and results Observed Congestion Upgrades improves overall welfare in the system A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 17 Cases and results Congestion in Real System A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 18 Cases and results Geographical Effects Nodal Prices at low demand periods 75.21 76.33 55.73 76.36 76.35 76.41 75.45 76.23 76.12 75.99 76.15 76.15 55.73 76.36 76.15 55.72 55.73 76.33 76.15 55.72 55.73 75.17 76.18 76.7755.58 76.44 76.78 76.29 55.73 55.73 55.73 74.34 73.48 55.73 55.72 55.73 55.73 77.14 77.82 55.73 55.73 75.08 55.73 55.73 55.7355.58 55.73 55.73 55.73 55.73 74.46 A.J. Lamadrid (Cornell University) 55.72 55.72 79.06 66.58 73.66 71.28 81.3 88.15 85.07 88.15 72.92 55.72 55.73 55.72 55.82 55.69 55.76 55.7 57.17 88.15 55.58 66.62 55.73 Demand Management and Transmission March 14 2012 19 Cases and results Storage Management Time Arbitrage versus Uncertainty Mitigation Real Energy Available, ESS @ bus 4, Gen 123 Real Energy Available, ESS @ bus 4, Gen 124 4 3 x 10 15000 2 Expected Storage Level Min Stor. L Max Stor. L S+ S− 1.5 1 Energy at end of period, MWh Energy at end of period, MWh 2.5 10000 Expected Storage Level Min Stor. L Max Stor. L S+ S− 5000 0.5 h=7 0 h = 19 5 10 h=6 15 20 h=7 0 Hour A.J. Lamadrid (Cornell University) h = 19 5 10 h=6 15 20 Hour Demand Management and Transmission March 14 2012 20 Cases and results System Costs per Energy Delivered Costs Total System 140 120 E[Cost], $/MWh−day 100 80 60 Operating Costs Capital Costs Environmental Costs 40 20 0 1 2 3 4 Case A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 21 Cases and results Conclusions Deferrable Demand both reduces capacity requirements and weighted operating costs Value of Storage lies in mechanisms for trading off uncertainty and time arbitrage Stochastic solution properly maintains system security and adequacy. Intelligent management of demand delivers higher value than transmission upgrades A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 22 Cases and results Allen, E., J. Lang, and M. Ilic. 2008. “A Combined Equivalenced-Electric, Economic, and Market Representation of the Northeastern Power Coordinating Council U.S. Electric Power System.” Power Systems, IEEE Transactions on 23:896–907. Carpentier, J. 1962. “Contribution a l’etude du dispatching economique.” Bulletin de la Societe Francaise des Electriciens 3:431–447. Chen, J., T.D. Mount, J.S. Thorp, and R.J. Thomas. 2005. “Location-based scheduling and pricing for energy and reserves: a responsive reserve market proposal.” Decis. Support Syst. 40:563–577. Condren, J., T. Gedra, and P. Damrongkulkamjorn. 2006. “Optimal power flow with expected security costs.” Power Systems, IEEE Transactions on 21:541–547. Guojun Gan, J.W., Chaoqun Ma. 2007. Data Clustering: Theory, Algorithms, and Applications, Society for Industrial and Applied Mathematics. A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 22 Cases and results Harvey, S., and W. Hogan. 2002. “Market power and market simulations.” Working paper, Center for Business and Government, John F. Kennedy School of Government, July. Joskow, P., and J. Tirole. 2007. “Reliability and Competitive Electricity Markets.” The RAND Journal of Economics 38:pp. 60–84. Kamat, R., and S. Oren. 2004. “Two-settlement Systems for Electricity Markets under Network Uncertainty and Market Power.” Journal of Regulatory Economics 25:5–37. Mansur, E.T. 2008. “Measuring Welfare in Restructured Electricity Markets.” The Review of Economics and Statistics 90:369–386. NERC. 2011. Reliability Standards for the Bulk Electric Systems of North America, NERC, ed. 116-390 Village Road, Princeton, NJ, 08540: North American Electric Reliability Corporation. NREL. 2010. “Eastern wind integration and transmission study: Executive Summary and Project Overview.” Working paper, EnerNex A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 22 Cases and results Corporation, The National Renewable Energy Laboratory, 1617 Cole Boulevard, Golden, Colorado 80401, January. NYISO. 2011. “Power Trends 2011.” Working paper, New York Independent System Operator. nyiso, N. 2011. “2011 Congestion Assessment and Resource Integration Study.” Working paper, New York Independent System Operator. Outhred, H. 1998. “A review of electricity industry restructuring in Australia.” Electric Power Systems Research 44:15 – 25. Pindyck, R.S. 1991. “Irreversibility, Uncertainty, and Investment.” Journal of Economic Literature 39:1110–1148. Rust, J. 1987. “Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher.” Econometrica 55:pp. 999–1033. Shiau, C.S.N., C. Samaras, R. Hauffe, and J.J. Michalek. 2009. “Impact of battery weight and charging patterns on the economic and A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 22 Cases and results environmental benefits of plug-in hybrid vehicles.” Energy Policy 37:2653 – 2663. Sioshansi, R., and P. Denholm. 2010. “The Value of Plug-In Hybrid Electric Vehicles as Grid Resources.” The Energy Journal 0. Tuohy, A., P. Meibom, E. Denny, and M. O’Malley. 2009. “Unit Commitment for Systems With Significant Wind Penetration.” Power Systems, IEEE Transactions on 24:592 –601. USCongress. 2005. Energy Policy Act, P. L. 109-58, ed. 109th Congress of the United States of America. Wolak, F.A. 2007. “Quantifying the supply-side benefits from forward contracting in wholesale electricity markets.” Journal of Applied Econometrics 22:1179–1209. Zhang, D., Y. Wang, and P. Luh. 2000. “Optimization based bidding strategies in the deregulated market.” Power Systems, IEEE Transactions on 15:981 –986. A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 23 Cases and results Thank you ajl259@cornell.edu A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 23 Cases and results Sensitivity to Wind and Network Specification Consider the following two cases: 1 2 Assume Wind is perfectly forecastable, and its output is at the expected level over the day (Case E[W]) Assume the network is not constrained, (Case Up) How does this affect the following four metrics? 1 Operating Costs 2 Wind Dispatched 3 Generation Capacity Needed 4 Compensation to Wind Owners A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 24 Cases and results Costs, Dispatches and Wind Compensation Sensitivity of Formulation 45,000 160,000 40,000 158,000 156,000 35,000 154,000 152,000 25,000 150,000 20,000 MWh Thousand $/day 30,000 148,000 15,000 146,000 10,000 144,000 5,000 142,000 140,000 Case 3 Case 4 Case 3 E[W] Case 4 E[W] Case 3 Up Case 4 Up Case Wind Compensation A.J. Lamadrid (Cornell University) Cost of the System (USD) Wind Dispatched (MWh) Demand Management and Transmission March 14 2012 25 Cases and results How the Available Wind is Dispatched Cases 3 and 3E Real Total Wind Output Real Total Wind Output 18000 18000 16000 16000 14000 14000 12000 E[dispatch] E[available] Min[dispatch] Max[dispatch] Min[available] Max[available] 10000 8000 Power, MW Power, MW 12000 8000 6000 6000 4000 4000 2000 2000 h=7 0 E[dispatch] E[available] Min[dispatch] Max[dispatch] Min[available] Max[available] 10000 2 h = 19 4 6 8 10 12 14 h=6 16 18 20 22 24 h=7 0 2 Hour h = 19 4 6 8 10 12 14 h=6 16 18 20 22 24 Hour Prices system A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 26 Cases and results Capacity Needed for Adequacy Generation Capacity Needed 70,000 Capacity (MW) 65,000 60,000 55,000 50,000 45,000 Case 3 Case 4 Case 3 E[W] Case 4 E[W] Case 3 Up Case 4 Up Case Generation Capacity Needed A.J. Lamadrid (Cornell University) Generation Capacity Needed (No ESS) Demand Management and Transmission March 14 2012 27 Cases and results Literature Electricity Markets [Harvey and Hogan(2002)]: bidding behavior in California crisis [Kamat and Oren(2004)]: two settlement markets and contract formation [Joskow and Tirole(2007)]: Model for demand management with heterogeneous consumers [Wolak(2007)]: complex bids, ramping costs [Mansur(2008)]: Cournot competition and supply in PJM Optimal ESS Management [Pindyck(1991)]: Stochastic control [Sioshansi and Denholm(2010)]: Ancillary services from PHEV’s Capital Good Replacement [Rust(1987)]: replacement of goods [Shiau et al.(2009)Shiau, Samaras, Hauffe, and Michalek]: deterioration of batteries for V2G services A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 28 Cases and results Engineering Models Network Model [Carpentier(1962)]: optimal power flow formulation [Outhred(1998)]: Australian Market design, ancillary services [Zhang, Wang, and Luh(2000)]: dispatch of generators with ramping constraints [Chen et al.(2005)Chen, Mount, Thorp, and Thomas]: Co-optimization [Condren, Gedra, and Damrongkulkamjorn(2006)]: management of uncertainty (contingecies) [Tuohy et al.(2009)Tuohy, Meibom, Denny, and O’Malley]: Montecarlo approach Regulatory [USCongress(2005)]: Electricity Modernization Act of 2005 [NERC(2011)]: set of reliability standards Back A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 29 Cases and results Some of the Constraints... And reactive power flow equations qit − X h i |vjt ||vit | Gijt sin(θi − θj ) − Bijt cos(θi − θj ) = 0, (2) j∈nB ∀i ∈ B, t ∈ T And inequalities, e.g., (3) PHYS− PHYS+ t −RPi ≤ pit − pi,t−1 ≤ RPi , ∀i ∈ G , t ∈ T P t∈T eit · t = 0, ∀i ∈ E (4) Back A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 30 Cases and results Characteristics of the generation fleet, 36-Bus system Summary of Generation Capacity and Load, NPCC system Capacity per Fuel Type (MW) RTO Total Cap. Load coal ng oil hydro nuclear wind refuse (GW) (GW) isone marit. nyiso ont. pjm quebec 1,840 2,424 4,557 5,287 14,453 0 9,219 1,072 18,185 3,594 14,611 0 4,327 22 5,265 0 8,915 0 1,878 641 7,345 779 2,604 800 5,698 641 4,714 12,249 12,500 0 0 0 30 0 0 0 0 0 55 0 0 0 22.9 4.8 40.1 21.9 53.1 800 23.8 3.5 38.2 21.1 51,6 0 Total Total NYNE 28,562 6,397 46,681 27,404 18,530 9,592 14,048 9,223 35,802 10,412 30 30 55 55 143.7 63 138.4 62 30 10 10 60 60 0 60 Rp.C. Back A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 31 Cases and results Wind and Storage Locations Area Bus Place NE NE NE NE NE NE NE NY NY NY NY NY NY NY NY NY NY 70002 71786 71797 72926 73106 73110 73171 74316 74327 75050 77950 78701 79578 79581 79583 79584 79800 Orrington Sandy Pond Millbury Northfield Southington Millstone Norwalk Harbor Dunwodie Farragut (NYC) Newbridge 9M. Point Leeds Massena Gilboa Marcy Niagara Rochester Total Wind (MW) ESS (MWh) 1725 3375 1560 2157 1145 1478 2560 241 7,332 14,345 6,630 9,168 4,867 6,282 10,881 1,024 142 1922 1327 3000 1705 1373 3672 4616 604 8,169 5,640 12,751 7,247 5,836 15,607 19,619 31,998 136,000 DL (MWh) 29,000 15,000 24,000 52,000 16,000 136,000 Back A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 32 Cases and results Expected Dispatch per Case Cases 1 and 2 Expected Dispatch per Fuel Type 4 6 x 10 x 10 5 4 Nuclear Hydro Coal NG Oil Wind ESS 3 2 1 E[Dispatch] per fuel type, MW E[Dispatch] per fuel type, MW 5 0 Expected Dispatch per Fuel Type 4 6 4 Nuclear Hydro Coal NG Oil Wind ESS 3 2 1 2 4 6 8 10 12 14 16 18 20 22 24 0 2 4 Hour h=7 h = 19 6 8 10 12 14 16 18 20 22 24 Hour h=6 h=7 h = 19 h=6 Back A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 33 Cases and results Final Nodal Prices Cases 3 and 3E Nodal Prices observed Nodal Prices observed 200 Price, $/MW 150 100 50 0 −50 h=7 −100 2 h=6 h = 19 4 6 8 10 12 14 16 Hour 18 20 22 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 250 200 150 Price, $/MW 250 100 50 0 −50 h=7 −100 2 h=6 h = 19 4 6 8 10 12 14 16 18 20 22 24 Hour Back A.J. Lamadrid (Cornell University) Demand Management and Transmission March 14 2012 34