Least Cost System Operation:

Economic Dispatch 2

Smith College, EGR 325

March 10, 2006 1
 Overview
• Complex system time scale separation
• Least cost system operation
– Economic dispatch first view
– Generator cost characteristics
• System-level cost characterization
• Constrained optimization
– Linear programming
– Economic dispatch completed
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 Time Scale Separation
1. Decide what to build
2. Given the plants that are built  decide
which plants to have warmed up and ready
to go this month, week...
3. Given the plants that are ready to
generate  decide which plants to use to
meet the expected load today, the next 5
minutes, next hour...
4. Given the plants that are generating 
Decide how to maintain the supply and
demand balance cycle to cycle 3
 Economic Dispatch Recap
• Economic dispatch determines the best
way to minimize the current generator
operating costs
• Economic dispatch is not concerned with
determining which units to turn on/off (this
is the unit commitment problem)
• Economic dispatch ignores the
transmission system limitations

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Constrained Optimization
& Economic Dispatch

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Mathematical Formulation of Costs
• Generator cost curves are not actually smooth
• Typically curves can be approximated using
– quadratic or cubic functions
– piecewise linear functions

Ci ( PGi )   i   PGi   PGi2 $/hr (fuel-cost)

dCi ( PGi )
ICi ( PGi )     2 PGi $/MWh
dPGi
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Mathematical Formulation of Costs
• The marginal cost is one of the most important
quantities in operating a power system
• Marginal cost = incremental cost: the cost of
producing the next increment (the next MWh)
• How do we find the marginal cost?

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 Economic Dispatch
• An economic dispatch results in all the
generator generating at a level where they
have equal marginal costs (for a lossless
system)

IC1(PG,1) = IC2(PG,2) = … = ICm(PG,m)

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 Incremental Cost Example
For a two generator system assume
C1 ( PG1 )  1000 20 PG1  0.01PG21 $ / hr
C2 ( PG 2 )  400 15 PG 2  0.03PG22 $ / hr
Then
dC1 ( PG1 )
IC1 ( PG1 )   20  0.02 PG1 $/MWh
dPG1
dC2 ( PG 2 )
IC2 ( PG 2 )   15  0.06 PG 2 $/MWh
dPG 2
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 Incremental Cost Example

If PG1  250 MW and PG2  150 MW Then

C1 (250)  1000 20  250  0.01  250  $ 6625/hr
2

C2 (150)  400 15  150  0.03  1502  $6025/hr

Then
IC1 (250)  20  0.02  250  $ 25/MWh
IC2 (150)  15  0.06  150  $ 24/MWh

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 Economic Dispatch: Formulation
• The goal of economic dispatch is to
– determine the generation dispatch that
minimizes the instantaneous operating cost
– subject to the constraint that total generation
= total load + losses
m
Minimize CT  Ci ( PGi )
i 1
Initially we'll
Such that ignore generator
m limits and the
 PGi  PD  PLosses losses 11
i=1
 Unconstrained Minimization
• This is a minimization problem with a
single inequality constraint
• For an unconstrained minimization a
necessary (but not sufficient) condition for
a minimum is the gradient of the function
must be zero, f (x)  0
• The gradient generalizes the first
derivative for multi-variable problems:
 f (x) f (x) f (x) 
f (x)  x , x , ,
 1 2 xn  12
Minimization with Equality Constraint
• When the minimization is constrained with an
equality constraint we can solve the problem using
the method of Lagrange Multipliers
• Key idea is to modify a constrained minimization
problem to be an unconstrained problem
That is, for the general problem
minimize f (x) s.t. g(x)  0
We define the Lagrangian L(x,λ )  f (x)  λ T g (x)
Then a necessary condition for a minimum is the
L x (x,λ )  0 and L λ (x,λ )  0 13
Economic Dispatch Lagrangian
For the economic dispatch we have a minimization
constrained with a single equality constraint
m m
L(PG ,  )   Ci ( PGi )   ( PD   PGi ) (no losses)
i 1 i 1
The necessary conditions for a minimum are
L(PG ,  ) dCi ( PGi )
    0 (for i  1 to m)
PGi dPGi
m
PD   PGi  0
i 1
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Economic Dispatch Example
What is economic dispatch for a two generator
system PD  PG1  PG 2  500 MW and
C1 ( PG1 )  1000 20 PG1  0.01PG21 $ / hr
C2 ( PG 2 )  400 15 PG 2  0.03PG22 $ / hr
Using the Largrange multiplier method we know
dC1 ( PG1 )
  20  0.02 PG1   0
dPG1
dC2 ( PG 2 )
  15  0.06 PG 2   0
dPG 2
500  PG1  PG 2  0 15
Economic Dispatch Example, cont’d
We therefore need to solve three linear equations
20  0.02 PG1   0
15  0.06 PG 2   0
500  PG1  PG 2  0
0.02 0 1  PG1   20 
 0 0.06 1  PG 2    15 
    
 1 1 0      500 
 PG1   312.5 MW 
 P    187.5 MW 
 G2   
    26.2 $/MWh  16
Constrained Optimization &
Linear Programming

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 Linear Programming Definition
• Optimization is used to find the “best”
value
– “Best” defined by us, the analysts and
designers
• Constrained opt  Linear programming
– Linear constraints
– Complicates the problem
• Some binding, some non-binding
• Visualize via a ‘feasible region’
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 Formulating the Problem
• Objective function
• Constraints
• Decision variables
• Variable bounds
• Standard form
– min cx
– s.t. Ax = b
xmin <= x <= xmax
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 Formulating the Problem
• For power systems:
min CT = ΣCi(PGi)
s.t. Σ(PGi) = PL
PGi min <= PGi <= PGi max

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Constrained Optimization
& Economic Dispatch
The Lagrangean

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 Formulating the Lagrangean
• Rewrite the constrained optimization
problem as an unconstrained optimization
problem !
– Then we can use the simple derivative
(unconstrained optimization) to solve
• The task is to interpret the results correctly

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 Formulating the Lagrangean
• We are minimizing gradients of both
multivariate equations
– CT & ΣPGi = PL
• For both equations to be at a minimum
these gradients must be linearly dependent
vectors
• CT – λw = 0
• with w ≡ ΣPG – PL = 0
• The “Lagrangean multiplier”
– λ is defined to be the scaling variable that
brings CT and w into linear alignment 23
 Lagrangean Example
max g(x) = 5x12x2
s.t. h(x) = x1 + x2 = 6 or x1 + x2 – 6 = 0

Formulate L =
L = g(x) – λh(x)
Find ?
dL/dx1, dL/dx2, dL/dλ
x1 = 4, x2 = 2, λ = 80
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Economic Dispatch & the Lagrangean
min CT = ΣCi(PGi)
s.t. Σ(PGi) = PL
PGi min <= PGi <= PGi max

Then L = ?

L  CT   PGi  PL 
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 Economic Dispatch Example
• What is the economic dispatch for the two
generator
What problem
is economic with for a two generator
dispatch
PG1 + PPG2=PPD 
G 2  500 MW and
system =P500MW
D G1

C1 ( PG1 )  1000 20 PG1  0.01PG12

$ / hr
C2 ( PG 2 )  400 15 PG 2  0.03PG22 $ / hr
Using the Largrange multiplier method we know
dC1 ( PG1 )
  20  0.02 PG1   0
dPG1 26
What is economic dispatch for a two generator
Economic Dispatch Example
system PD  PG1  PG 2  500 MW and
PG1 )  1000
C•1 (Formulate theLagrangean
20 PG1  0.01PG1
2
$ / hr
•
C2 ( PG 2 )  400 15 PG 2  0.03PG 2
Take derivatives 2
$ / hr
• Solve
Using the Largrange multiplier method we know
dC1 ( PG1 )
  20  0.02 PG1   0
dPG1
dC2 ( PG 2 )
  15  0.06 PG 2   0
dPG 2
500  PG1  PG 2  0
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Economic Dispatch Example, cont’d
We therefore need to solve three linear equations
20  0.02 PG1   0
15  0.06 PG 2   0
500  PG1  PG 2  0
0.02 0 1  PG1   20 
 0 0.06 1  PG 2    15 
    
 1 1 0      500 
 PG1   312.5 MW 
 P    187.5 MW 
 G2   
    26.2 $/MWh  28
 Economic Dispatch: Formulation
• We find that
– PG1 = 312.5MW;
– PG2 = 187.5MW
•  = $26.2/MWh

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 Discussion
• Key results for Economic Dispatch?
– Incremental cost of all generating units is
equal
– This incremental cost is the Lagrangean
multiplier, 
– ‘’ is called the ‘System ’ and is the system-
wide cost of generating electricity
• This is the price charged to customers

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Power System Control Center

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Power System Control Center

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New England Power Grid Operator

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Regional Prices and Constraints

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The Hong Kong Trade Development Council

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 Summary
• Economic dispatch is used to determine
the least cost means of using existing
generating plants to meet electric demand
• To calculate the economic dispatch for a
power system, the techniques of linear
programming + the Lagrangean are used
• Now to a review of the production cost
homework results...
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