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P. 1
Unit 4

Unit 4

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Published by Pavan Khetrapal

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Published by: Pavan Khetrapal on Feb 01, 2014
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UNIT-4RESTRUCTURE4.1 Introduction to Restructuring
The electric power industry has over the years been dominated by large utilities that had an overall authority over all activities in generation, transmission and distribution of power within its domain of operation. Such utilities have been often been referred to as
Vertically Integrated Utilities
 (VIU) .Such utilities served as the only electricity provider in the region and were obliged to provide electricity to everyone in the region. nalogous to perceived competitions in airline, telephone, and natural gas industries which demonstrated that vertically integrated monopolies could not provide services as efficiently as competitive firms, the electric  power industry plans to improve its efficiency by providing a more reliable energy at least cost to customers.  competition is guaranteed by establishing a
restructured environment
in which customers could choose to buy from different suppliers and change suppliers as they wish in order to pay mar!et"based rates. Under the process of
restructuring and deregulation
, vertically integrated utilities (VIU) are unbundled legally or functionally. #holesale generation and retailing of electricity is opened for competition. #holesale electricity mar!ets are organi$ed with several generation companies that compete to sell their electricity in a centrali$ed pool or through bilateral contracts with  buyers. In retail competition, customers can choose among different sellers or buy directly from the wholesale mar!et. n important point to note is that the restructuring process was however not uniform in all countries. #hile in many instances, it started with the brea!ing up of a large vertically integrated utility, in certain other instances restructuring was characteri$ed by the opening up of small municipal monopolies to competition. In brief, the governments advocating deregulation or restructuring want competition in energy production, and they want to see significant levels of customer choice in the retail mar!et for electricity. t the same time, it recogni$es that it is best to have only one transmission and one distribution system in any one area. Therefore, the purpose of
 is to restructure the electricity supply industry so that power production and retail sales are competitive, while delivery is still a regulated, monopoly franchise business.
4.2 rc!itecture o" Restructured or #eregulated $o%er System
The typical structure of a deregulated electricity supply system with lin!s of information and money flow between various players is shown in figure %.&. 'urther, the architecture shown in the figure is not a universal one. There eist variations across countries and systems. The  possibility of having such a comple nature of information flow has been one of the driving factors in the process of deregulation of the power sector. The introduction of restructuring in the electric industry has brought several new entities in the electricity mar!et place, while on the other hand redefining the scope of activities of many of the eisting players. Variations eist across mar!et structures over how each entity is particularly
defined and over what role it plays in the system. owever, on a broad level the following entities can be identified*'igure %.& Structure of +eregulated ower Systema.
&eneration Com'anies (&ENC)S*
* This may refer either to individual generating units or more often to a group of generating units within a single company ownership structure with the sole ob-ective of producing power, and commonly referred to as independent  power producers (I). +ifferent mar!ets may classify generators based on their rated capacity or in the way, the generators have been contracted to operate in the mar!et. b.
Transmission Com'anies (TRNSC)S*
* The transmission companies are those entities, which own and operate the transmission lines. Their prime responsibility is to transport the electricity from the generators to the customer, and ma!ing available the transmission system to all entities in the mar!et. 'or their services, they levy a transmission tariff. In some systems, these transcos are classified according to the operating voltage levels.
#istri+ution Com'anies (#ISC)S*
* The distribution companies are usually those entities owning and operating the local distribution networ! in an area. They buy wholesale electricity either through the spot mar!ets or through direct contracts with gencos and supply electricity to the end"user customers.d.
  customer is an entity consuming electricity. In deregulated mar!ets, the customer has several options for buying electricity. It may choose to buy electricity from the spot"mar!et by bidding for purchase, or may buy directly from a genco or even from the local distribution company.e.
Inde'endent System )'erator (IS)*
* The IS is an entity entrusted with the responsibility of ensuring the reliability and security of the entire system. It is an independent authority and does not participate in the electricity mar!et trades. It usually does not own generating resources, ecept for some reserve capacity in certain cases. In order to maintain the system security and reliability, the IS procures various services such as supply of emergency reserves, or reactive power from other entities in the system.f.
aret )'erator
* The /ar!et perator is an entity responsible for the operation of the electricity mar!et trading. It receives bid offers from mar!et participants and determines the mar!et price based on certain criteria accordance with the mar!et structure. The mar!ets may have different trading schemes such as hourly trading for the net day or trading in futures" wee!, months or years ahead. Individuals wor!ing on restructuring would agree on a basic principle that access to transmission services should accommodate consumer choice and supply competition. 0estructuring in electricity industry will create new business opportunities where new firms selling new products and services will appear, consumers will have alternatives in  buying electricity services, and new technologies such as metering and telecommunications devices will develop.
4./ Restructuring odels 0 Electricity aret odels,
The electricity industry is, in principle, -ust li!e any other producer or manufacturer of goods in that the electrical product (!#h) is made at a particular location and needs to be transported to the customer who has contracted to purchase that product at a certain price.  1ormally, some form of a mar!et is set up in a democratic society so that purchasers can 2shop around3 for the product that best suits them, at the price they consider to give the best value. 'or efficiency and epediency, trading mar!ets have a recogni$ed infrastructure whereby intermediaries purchase and resell commodities in varying 4uantities and arrange for delivery to varying locations. In the case of electrical energy, there is only one product, and at every time instant the amount produced must e4ual the amount consumed, otherwise the fre4uency will vary. 5onse4uently, loo!ed at from a mar!et"structure viewpoint, there must be a direct and continuous connection between generators and the customers, but the various mar!et intermediaries, such as coordinators or controllers and energy bro!ers or traders, can be

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