Transcript FERC Task Force on Pricing Reactive Power

Wide Open Load Following:
Mark Lively’s Approach to
Pricing Reactive Power
2004 December 2
CEIC Luncheon Seminar
Carnegie Mellon University
Electric Industry Center
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Reactive Power Payments
• Mandatory Reliability
Standards
• NERC imposes fines
each time it identifies
problem
• Offender pays NERC
fund
• Counter-party ???
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• Market for
Unscheduled Flows
• FERC sets
mechanism for
metered amounts
• Offender pays
counter-party
• Counter-party earns
revenue
Mark B. Lively--Utility Economic Engineer--301-428-3618
Reactive Power Pricing
List of Approaches
•
•
•
•
Cost of service for generation
Competitive bidding among generators
Tie to providing active power generation
WOLF for unscheduled amounts
– Generation
– Load
– Independent reactive sources
– Inter-control area flows
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Reactive Power Pricing
Cost of Service Method
• AEP Method (Opinion 440, 1999 July 30)
• Annual revenue requirement
• Used recently by several IPPs
– Big Sandy Peaker Plant, LLC ER04-1103
– Hills Energy, LLC ER04-1102
• PJM has a performance requirement, or
else payment is withheld
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Reactive Power Pricing
Competitive Bidding
•
•
•
•
Ancillary service
Bid for capacity availability
Dispatched by system operator
Performance requirement (?)
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Reactive Power Pricing
Tie to Providing Active Power
• Reactive Capability Related to Active
Capability
– Perhaps 5 KVAR for 100 KW
– .9 Leading (48 kvar) or .95 Lagging (-33 kvar)
• Most generators able to produce some
reactive under normal conditions
• Actual reactive power dispatched centrally
• Nonperformance charge (?)
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Reactive Power Pricing
WOLF for Unscheduled Amounts
•
•
•
•
•
•
•
Mortar for the brick wall of contracts
Payment for non-performance
Payment for over-performance
Non-participating IPPs, including DG
Loads
Standalone reactive devices
Inter-control area flows
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
“People worked harder for a reward, especially
one that coincided with patriotism.” Tom Clancy,
Without Remorse.
“Producers work harder for a reward, especially
one that coincides with reliability.” Mark Lively,
in explaining WOLF.
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Basic Concept
Use the quantification of the quality of
public goods to set the simultaneous
prices of the unscheduled portion of
related commodities whose usage impacts
the public goods. Note that the
unscheduled portion of the commodity can
be positive or negative.
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Public Goods
• Non-excludability—It is difficult to keep
people out—Fireworks display
• Non-rivalrous consumption—My usage
does not interfere with your usage—
Fireworks display
• For electricity, electric potential meets this
description of a public good
• Measured as voltage
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
Power provided and maintained for the explicit purpose
of insuring continuous, steady voltage on transmission
networks. Reactive power is energy which must be
produced for maintenance of the system and is not
produced for end-use consumption. Electric motors,
electromagnetic generators and alternators used for
creating alternating current are all components of the
energy delivery chain which require reactive power.
Losses incurred in transmission from heat and
electromagnetic emissions are included in total reactive
power. This power is supplied for many purposes by
condensers, capacitors and similar devices which can
react to changes in current flow by releasing energy to
normalize the flow, and regulating generators may also
have this capability.
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
• Power merely absorbed and returned in
load due to its reactive properties
• Symbolized by the letter Q and is
measured in the unit of Volt-AmpsReactive (VAR)
• Mathematical construct
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
•
•
•
•
•
In an alternating current circuit both the current and voltage are sinusoidal.
If there is a phase separation between the two quantities, the instantaneous
power will have to 'work' harder to produce the equivalent power if they
were in phase.
Reactive power is described as the amount of power required to overcome
the phase shift between the current and voltage. It is generally regarded as
waste power as it is used to 'energize' the circuit to allow it do useful work.
In an alternating current circuit both the current and voltage are sinusoidal
and power is expressed as the product of current and voltage. In a simple
resistive circuit the voltage and current are in phase, the real power is equal
to the apparent power and no reactive power flows.
However when the voltage and current pass through certain types of circuits
(inductive or capacitive) the voltage and current become out of phase. This
phase separation is usually called the Power factor and the current is said
to lag or lead the voltage.
Capacitive circuits generate reactive power and inductive circuits absorb
reactive power. If large quantities of reactive power (positive or negative)
are present then the overall power factor will be low.
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
• In alternating current power transmission and distribution, reactive
power is an abstract quantity used to describe the effects of a load
which on the average neither supplies nor consumes power. It is
defined as the product of the rms voltage, current, and the sine of
the difference in phase angle between the two. Compare to other
definitions of power (effective power, apparent power, complex
power). Reactive power is usually denoted Q and expressed in voltamperes reactive, or var (not watts). This is to avoid confusion when
specifying the power of a load (var automatically refers to reactive
power).
• Reactive power is associated with the reactance of a load, and
unlike effective power, can be positive or negative. A purely
capacitive load is associated with a positive reactive power, whereas
a purely inductive load is associated with a negative reactive power.
To maintain efficient transmission, it is often necessary to reduce the
magnitude of the reactive power in a system. This is known as
power factor correction
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Voltage and Reactive Power
• Leading reactive power raises local
voltage—Add capacitors to counteract low
voltage conditions
• Lagging reactive power lowers local
voltage
– Add reactors to counteract high voltage
conditions
– Turn off capacitors
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
Voltage
Low
High
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Leading
Good
Bad
Lagging
Bad
Good
Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
Low Voltage
High Voltage
Reward Leading
Reward Lagging
Punish Lagging
Punish Leading
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
Low Voltage
Reward Leading
Punish Lagging
Q Pricing
($/KVARH)
India UI
High
limit
Lower Than
Normal Voltages
Low
limit
Higher Than
Normal Voltages
India UI
NOTE: Q is defined to
be positive for leading
reactive power
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High Voltage
Reward Lagging
Punish Leading
Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Reactive Power
Low Voltage
Reward Leading
Punish Lagging
Q Pricing
($/KVARH)
High
limit
Lower Than
Normal Voltages
Low
limit
NOTE: Q is defined to
be positive for leading
reactive power
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Higher Than
Normal Voltages
High Voltage
Reward Lagging
Punish Leading
Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Marginal Cost Pricing
• Each participant has incentive to increase
production until its marginal cost is equal
to the WOLF price
• The WOLF price decreases as participants
increase production
• The WOLF price thus provides an indirect
measure of marginal cost
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Dynamic Economic Theory
Supply
Demand
Price
($/MVARH)
Equilibrium Price
Price Pressure
Nominal Price
Reactive Power
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(MVAR)
Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Adjusting the Curve
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Severity of problem
• For small voltage
excursions, no harm,
no foul
• Low voltage
excursions are more
serious than high
voltage excursions
Voltage
Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Control Theory
target
+
$
Quantify
-
Power Quality
cost
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Variance from Marginal Cost
• Large participants can optimize income by
producing such that their marginal cost is
less than the WOLF price
• Set production level so that marginal cost
is equal to marginal revenue
• Marginal revenue is price plus production
times the derivative (which is negative) of
price with respect to production
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Mark B. Lively--Utility Economic Engineer--301-428-3618
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Mark B. Lively--Utility Economic Engineer--301-428-3618
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Mark B. Lively--Utility Economic Engineer--301-428-3618
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Mark B. Lively--Utility Economic Engineer--301-428-3618
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Mark B. Lively--Utility Economic Engineer--301-428-3618
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Variance from Marginal Cost
•
•
•
•
Incremental cost
Need better definition of cost shape
Integrate under the curve
Price varies with amount of reactive
produced
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Control Theory
target
+
$
Quantify
-
Power Quality
Voltage
cost
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Simultaneous Pricing Working in India
• Infamous for low frequency
Frequency Distribution-Southern Region of India
Number of Minutes Each Month With Specified Average Frequency
12,000
10,000
8,000
Jan-02
Feb-02
Mar-02
6,000
Apr-02
4,000
2,000
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51.45
51.30
51.15
51.00
50.85
50.70
50.55
50.40
50.25
50.10
49.95
49.80
49.65
49.50
49.35
49.20
49.05
48.90
48.75
48.60
48.45
48.30
48.15
48.00
47.85
47.70
0
Mark B. Lively--Utility Economic Engineer--301-428-3618
Hertz
Wide Open Load Following
Simultaneous Pricing Working in India
• Introduced Reliability Tariff 2003 January 1
• Raised all UI prices about 40% 2004 April 1
135
6
5
4
90
3
2
45
US $/MWh
UI RATE ( Rupees/kWh)
7
1
0
48.5
0
49
49.5
50
50.5
51
Frequency (Hz)
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Mark B. Lively--Utility Economic Engineer--301-428-3618
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
Simultaneous Pricing Working in India
• Average frequency dramatically improved
UI Price =0.0 Max Price =420.0
+42%
South India Region Frequency Analysis
2.5
2
1.5
1
Freq. Deviation
0
Ju
l-0
4
04
04
M
ay
-
M
ar
-
Ja
n04
ov
-0
3
N
Ju
l-0
3
Se
p03
03
M
ay
-0
3
M
ar
-
Ja
n03
Se
p02
N
ov
-0
2
02
M
ay
-0
2
Ju
l-0
2
-0.5
Std. Err. (50)
M
ar
-
Ja
n02
Hertz
0.5
-1
-1.5
-2
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Mark B. Lively--Utility Economic Engineer--301-428-3618
-2.5
Wide Open Load Following
Simultaneous Pricing Working in India
• Improved Frequency Distribution
Monthly Distribution of Minute by Minute Frequencies
10000
10000
9000
Count of Minutes
8000
7000
6000
5000
Jan-02 48.69 Hertz
Jan-02 48.69 Hertz
Jan-03
Jan-02 49.91
48.69 Hertz
Jan-03 49.91 Hertz
Jul-04 50.02 Hertz
4000
3000
2000
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Hertz
Hertz
51.5
51.5
51.3
51.3
51.1
51.1
50.9
50.9
50.7
50.7
50.5
50.5
50.3
50.3
50.1
50.1
49.9
49.9
49.7
49.7
49.5
49.5
49.3
49.3
49.1
49.1
48.9
48.9
48.7
48.7
48.5
48.5
48.3
48.3
48.1
48.1
47.9
47.9
0
0
47.7
47.7
1000
Mark B. Lively--Utility Economic Engineer--301-428-3618
WOLF & Negotiated Contracts
• WOLF Pricing provides
– Alternative price
– Way to determine penalty
– Way to determine reward
– Assessment of successful contract
negotiations
– Pricing for affiliates
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Mark B. Lively--Utility Economic Engineer--301-428-3618
WOLF Versus Negotiated Contract
$/KVAR-Year
Annual Hours of Operation
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Mark B. Lively--Utility Economic Engineer--301-428-3618
Wide Open Load Following
• Provides price for unscheduled reactive
power
• Leads to marginal cost price discovery
• Feedback corrects the price
• Works with partial VAR obligation
• Related concept a success in India
• Supports contract negotiations
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Mark B. Lively--Utility Economic Engineer--301-428-3618