impacts of reserve and fixed costs on greece’s day-ahead scheduling problem panagiotis andrianesis...

Impacts of Reserve and Fixed Costs on Greece’s Day-Ahead Scheduling

Problem

Panagiotis Andrianesis a, George Liberopoulos a Kostis Sakellaris b,c, Andreas Vlachos b

a Department of Mechanical and Industrial Engineering, University of Thessaly, Volos, Greece

b Regulatory Authority for Energy, Athens, Greecec Athens University of Economics and Business

PROMITHEAS-2 International Black Sea Energy Policy Conference"Energy Investments and Trade Opportunities"

8,9 October 2008, Athens, Greece

1. IntroductionEuropean Directive 96/92/EC: liberalization and integration of the national electricity markets

GREECE: Regulatory Authority for Energy (RAE)Hellenic Transmission System Operator (HTSO)

Grid Control and Power Exchange Code for Electricity (2005): Day-Ahead Market Real Time Dispatch Imbalances Settlement Capacity Assurance Mechanism

1. Introduction

Day-Ahead Scheduling (DAS) Problem:basis for the wholesale electricity market

DAS: aims at minimizing overall cost of serving energy load, under conditions of reliable system operation, ensuring adequate reserves, i.e., a security-constrained unit commitment program, co-optimizing energy and reserves

2. Greece’s Electricity System

Type Number of units Capacity (MW)

Lignite 22 4808.10

Oil 4 718.00

Combined Cycle 5 1962.10

Natural Gas 3 486.80

Small Thermal 2 116.10

Hydro 39 3016.50

Renewables/Cogeneration >100 889.94

Total Capacity: 11997.54

Total Capacity (thermal plants): 8091.10

Generation mix

2. Greece’s Electricity SystemYearly load profile for 2007


Frequency-related ancillary services (“reserves”):

Primary reserve requirement : 80 MW

Secondary reserve requirement : 150-300 MW

Tertiary reserve requirement: 300-600 MW

2. Greece’s Electricity SystemNorth: 2/3 of installed capacity

South: 2/3 of load

Transmission Constraint


2-zone model : North – South

Producers face different Marginal Generating Prices, when the transmission constraint is activated

Suppliers always face a uniform System Marginal Price (SMP)

Incentives: installation of new generation near consumption

3. Day-Ahead Scheduling ProblemINPUTS: - Energy offers - Reserve offers- Fixed costs (start-up, shut-down, minimum-load)- System load- Reserve requirements- Transmission constraints- Units’ technical characteristics (technical minimum, technical maximum, maximum reserve availability, minimum up/down times, ramp up/down limits)

OUTPUTS:- Unit commitment- Energy and reserve scheduling for each hour of the next day

3. Day-Ahead Scheduling ProblemDAS problem formulation (MILP):

Variable cost coefficients

Continuous variables (energy, reserve)

Fixed cost coefficients

Integer variables (status, start-up,

shut-down)

overall variable costs

overall fixed costs+minimize

,u h x 0 , integeru hz

, ,

T T, , ,,

, ,

min { }u h u h

DAS u h u h u u hu h u h

f x z

c x d z

3. Day-Ahead Scheduling Problemsubject to:

, ,u h u h hu u

1 2A x A z a

, , , , ,u h u h u h u h u h 1 2B x B z b

h

,u h

0,0u ux x 0

,0u uz z u

• Market clearing constraints:

• Individual constraints:

• Initial conditions:

and

3. Day-Ahead Scheduling ProblemDAS problem formulation :

overall reserve cost

overall fixed costs

+minimize overall energy cost

+

start- up shut-down minimum-loadsubject to:

energy balancereserve requirements

market-clearing constraints

technical minimumtechnical maximummaximum reserve availabilityminimum up/down timesramp up/down limits

individual constraints

3. Day-Ahead Scheduling Problem 3.1 Impact of Reserve Offers

Questions: Pricing reserve as separate commodity ?

Priced reserve offers ?

Offers included in the objective function ?

Pricing scheme?

Impact on scheduling ?

Rules (price caps…) ?

3. Day-Ahead Scheduling Problem 3.1 Impact of Reserve Offers

Pricing schemes for reserve:1.Scheme based on shadow price:

a. Non-priced bids (sorting rule based on energy bids)b. Priced bids included in the objective function

2. Scheme based on highest bid accepted:a. Bids not included in the objective function (sorting rule

based on reserve bids)b. Bids included in the objective function

3.Pay-as-bid scheme:a. Bids not included in the objective function (sorting rule

based on reserve bids)b. Bids included in the objective function

3. Day-Ahead Scheduling Problem 3.2 Impact of Fixed Costs

Fixed costs introduce non-convexities Non existence of equilibrium prices in a Walrasian auction Relevant literature: O’Neill et al. (2002, 2005)

Hogan and Ring (2003) Bjørndal and Jörnsten (2004)

DAS problem: - Should fixed costs be included in the objective function or not? - Should producers be paid for their fixed costs? - If not paid, they must internalize fixed costs in their energy offers, distorting the SMP.

4. Illustrative Example8-unit example:

Type Unit Capacity(Technical maximum)

Technical minimum

Energy bid

Lignite u1 4000 2500 35

Oil u2 450 250 80

Gas u3 476 144 72

Gas u4 300 150 110

Gas u5 550 155 75

Gas u6 389 240 70

Gas u7 389 240 85

GT u8 141 0 150

Energy offers


Type Unit Reserve availability Reserve bid

Lignite u1 300 10

Oil u2 50 5

Gas u3 150 4

Gas u4 80 4.5

Gas u5 150 6

Gas u6 149 3.5

Gas u7 149 3

GT u8 141 2

Reserve offers


Unit Start-up/shut-down cost

Minimum-load cost

Minimum up/down time

Initial condition

u1 1 000 000 - 24 ON

u2 40 000 800 8 OFF

u3 16 000 550 8 ON

u4 30 000 1 000 16 OFF

u5 24 000 700 5 ON

u6 14 000 500 3 ON

u7 14 000 600 3 OFF

u8 5 000 200 0 OFF

Units’ data

4. Illustrative ExampleAdjusted demand (load curve)

Reserve requirement: 600 MW

4. Illustrative Example

DAS problem: modeled with mathematical programming language AMPL

solved with ILOG CPLEX 9.0 optimization software package

4. Illustrative ExampleEnergy prices (SMP) and Reserve Prices (RP) for different pricing schemes


SMPs

RPs


SMPs

RPs: shadow price scheme

RPs: highest bid accepted scheme


Unit Case 1a Case 1b Case 2a Case 2b Case 3a Case 3b

u1 2 636 000 2 662 820 2 647 990 2 650 650 2 636 660 2 650 650

u2 - 30 150 - 26 175 - 28 300 - 27 125 - 28 750 - 27 875

u3 - 3 002 19 935 -32 145 - 12 912 -12 135

u4 - - - - - -

u5 - 21 280 905 - 19 210 - 19 045 - 24 244 - 24 446

u6 20 155 28 475 20 074 20 880 15 340 16 431

u7 - 7 812 - 5 428 - 6 024 - 6 024 - 7 812 - 7 812

u8 22 701 44 133 15 910 25 380 6 768 6 768

Units’ net profits in €


Unit Case 1a Case 1b Case 2a Case 2b Case 3a Case 3b

u1 28.562 28.583 28.692 28.721 28.570 28.721

u2 - 7.947 - 6.899 - 7.459 - 7.149 - 7.578 - 7.347

u3 - 0.486 3.163 - 0.005 0.023 - 2.090 - 1.925

u4 - - - - - -

u5 - 4.369 0.186 - 3.944 - 3.910 - 4.977 - 5.019

u6 4.193 6.080 4.176 4.459 3.191 3.509

u7 - 8.138 - 5.654 - 6.275 - 6.275 - 8.138 - 8.138

u8 N/A N/A N/A N/A N/A N/A

Units’ net profits in €/MWh


Units may incur losses even if they get paid for their fixed costs

WHY?

Need for a bid/cost recovery mechanism


CaseOverall Energy

Payments

Overall Reserve

Payments

Overall Fixed Costs Payments

1a 7 281 950 96 600 158 200

1b 7 299 050 187 800 (as 1a)

2a (as 1a) 110 400 (as 1a)

2b (as 1b) 108 000 (as 1a)

3a (as 1a) 65 032 (as 1a)

3b (as 1b) 64 722 (as 1a)

Overall Payments

Reserve Payments: range from 0.9 – 2.6 % of energy paymentsFixed Costs Payments: about 2.2 % of energy payments


Type Unit Fixed costs includedfor all cases

Fixed costs excluded for all cases except for 3a

Lignite u1 1-24 1-24

Oil u2 10-24 10-22

Gas u3 1-24 1-24

Gas u4 - -

Gas u5 1-24 1-24

Gas u6 9-24 9-24

Gas u7 11-14 11-14

GT u8 1-24 1-24

Unit Commitment

5. Summary and Conclusions

Sketch of Greece’s electricity system

Simple model of the Day-Ahead Scheduling problem

Emphasis on: frequency-related ancillary services (“reserves”) fixed costs (start-up, shut-down, minimum-load)

Various reserve pricing schemes: shadow price highest bid accepted pay-as bid

Illustrative 8-unit example

5. Summary and Conclusions

Units may incur losses through DAS participation

Bid/cost recovery mechanism is needed

Reserve payments contribute to the same direction

DAS: very complicated problem

due to energy – reserve interaction, and

non-convexities introduced by fixed costs

careful and incentive-compatible design is needed

Questions ?

impacts of reserve and fixed costs on greece’s day-ahead scheduling problem panagiotis andrianesis...

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