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Capturing the benefits of high performance computing for investment decisions in electricity markets: an emphasis on capacity expansion in a carbon

-constrained and uncertain future

Charles Ikenna Nweke (BEng)

Project submitted in partial fulfilment of the requirements for the degree of MSc (Energy and Resources) UCL School of Energy and Resources, Australia

I, Charles Ikenna Nweke confirm that the work presented in this report is my own. Where information has been derived from other sources, I confirm that this has been indicated in the report.

15 June 2012.

As worldwide demand for energy continues to grow, the need for continuous expansion of global electricity supply – the most usable form of energy - cannot be overemphasized. The drive to match demand with adequate supply has led to the restructuring of many electricity regimes around the world. Also the increasing awareness of the threats posed by greenhouse gas pollution is undoubtedly influencing operating and investment decisions in different electricity frameworks. For these and other reasons, investment in renewable energy technologies has resulted in major installations of wind farms across the world in the last decade. Meeting the demand growth in a sustainable way requires significant penetration of renewable energy sources which could be intermittent in nature (e.g wind and solar). In turn, capacity expansion planning (CEP) to accommodate the different technologies and perhaps market frameworks requires a shift from orthodox methods used in the past. Optimization models used in the past to aid investment decisions have always been constrained by computing performance hence allowing certain level of detail. The objective of this thesis was to assess the viability of a more thorough method of modelling demand in CEP by retaining chronology, against current enhancements in computing performance. The effectiveness of traditional modelling of load demand using Load Duration Curve (LDC) approximation was also measured against increasing level of intermittent generation using a South Australian electricity model. Based on this research it was established that the developments so far in the computer chip industry warrant a shift from less detailed models to capture the increasing complexities inherent in the changing electricity frameworks around the world. It was also found that the conventional modelling techniques do not adequately reflect the most economic investment decisions when the level of intermittent generation share becomes significant in a system. Results from a number of simulations comparing the traditional LDC versus a chronological demand model shows that increasing penetration of wind technologies incurs significant operation costs which the chronological modelling is better able to manage. While retaining chronology in CEP was shown to be viable at this time among other advantages, the traditional LDC method proved still to be a very efficient method of aiding decisions as it presents a hugely tractable option for any size or type of electricity system ii

being modelled. Nevertheless, this work exposes the frailties of the different methods that energy planners and analysts need to be wary of knowing that huge commitments will rely on the outcome of their models.


whose unflinching support and reassurances kept me going in difficult times. Mohan Kolhe for his input and guidance from the very beginning. Of course all these wouldn’t have been a smooth sail without the impact of the non-academic staff at UCL SERAus. iv . encouragement. and inspiration of others near and far. I am very grateful to the management of Energy Exemplar pty and Mr Glenn Drayton (PhD) in particular for supporting this research and providing the platform necessary to access and utilize the endless data required for this work.Acknowledgement This thesis is the outcome of countless hours of dedicated work guided by the trust. Lastly I would like to acknowledge the backing and reinforcement from my family and friends who in one way or the other have helped me all through this programme. I am particularly indebted to my supervisor Dr. Also I am very grateful to the academic staff at UCL School of Energy and Resources. particularly Ms Maria Stavrinakis. Australia for their input in preparing me for this cross-disciplinary research I dared to embark on. ideas.

9 Moore’s Law and Evolution of Computing Technologies ....................... 4 Overview and Work Flow of Thesis ............................ 3 Energy Exemplar’s Next-generation power market simulator..... 27 Representation of Load Profile by Support Tools ......... 13 Grid versus Cloud Computing ...2 2.................................................................................................................... vi List of Tables……….......................3 2................................4 2............vii Acronyms & Abbreviations…………………………………………………………………………………………………….............................5 2............................................. 10 Grid Computing ............................................... 15 Decomposition Methods ..........ii Acknowledgements…………………………………………………………………………………………………………..............................................iii List of Figures……………………………………………………………………………………………………………………………....................7 2.........................................................................Table of Contents Abstract…………………………………………………….................................1 2.............................……………………………………………………………………...........................2 2........................ 24 Dealing with Uncertainties and Imperfections inherent with Decision Support 26 Scenario analysis ......................................…………...........................3 2..................................................………………………………………………………………………………………….................................................................................................. 8 Single Processors to Parallel Computing ..........................8.................................3 1..............................................................................…………………………x 1 1................................................. 5 2 A PRACTICAL PERSPECTIVE ON HIGH PERFORMANCE COMPUTING (HPC) AND OPERATIONS RESEARCH (OR) ................ 28 v .............2 1............................. viii Definition of Terms……………………………………………………………………………………………………................................................................ 8 2............................................. 1 Problem definition and motivation ......6 2................................... 14 Operation Research Methods ...............8.......................1 1.7....................................7.....................................................................................……………………….......................8 Tools 2.............................................................................. 15 Practical Applications of Optimization Tools in Capacity Expansion ...............7...... 2 Objective and scope of the Thesis ....2 2...... 10 Multicore Processing ............................................ 21 Stochastic Programming.................................. 26 Sensitivity analysis ..........1 2......1 2....... 12 Cloud Computing ..............................................4 INTRODUCTION .........

..................................................................................................................................... 51 Model Input ........................1 4........................................................................................4 4 4..3 3.....................2 4............................................2 5............................. xi APPENDIX II – Carbon Pricing and LRET Scenario Input ........................................................ 79 REFERENCES ............................................................... 59 SIMULATION AND RESULTS ..................................3 INVESTMENT DECISIONS IN ELECTRICITY MARKETS .................................................. 51 Bull’s eye representation of model variables .....xvi APPENDIX III – Demand Projection Input Data .....................................................1 3.......................................................................................................2 7 8 8................................................................ 61 Base Case Simulations .................. 35 Liberalized Electricity Industry .............................................................. 69 Solution Summary: Resource versus Results .... 45 PLEXOS LT Plan ................................................1 6................................... 75 CONCLUSIONS ...................4 5................................................................................................................................................................ 77 Findings and Recommendations ..............................................................5 6 6...........1 8............2 3...............................................4 4..................................................3.......... 34 Regulated Electricity Framework .................................... xi APPENDIX I – Model Overview and New Entrants Input... 61 Simulation Parameters and Conditions .................................................................................................................... 45 PLEXOS LT Plan formulation ................. 68 Emissions pricing and competitiveness of renewable investments ........1 5....................................................3 5............................................................ 46 Model Overview .......................................................................... 36 Implications of Capacity Imbalance.............................3......................5 5 5.............. 77 Prospects for Further Research Work .............................. 67 Impact of market access ......................................................................................1 4...................1.................. 42 MODELLING LONG-TERM INVESTMENT DYNAMICS USING PLEXOS® ............................................................. xviii vi .......................2 5............................................................ 62 Sensitivity Analysis ...............................................................3 4..................1 5..............................2 8..................................2................................... 59 General Model Hypotheses ...................................................1 4.............. 39 Case Study: The Australian National Electricity Market (NEM) ........................ 52 Scenario Analysis ............................ 81 APPENDIX .......3 3.......................... 72 Improving LT Chronological Execution Times............................................................................

............................. 31 Figure 2-9: 200-Block representation of the demand applied in this research..................................... 72 Figure 8-1: Model visualization showing existing generators and new entrants ........................................................................................................................................................ 70 Figure 5-7: Scenario analysis of GHG productions under different investment regimes .............................. 24 Figure 2-5: South Australian demand curve for March 2011 .................................................................................................................................................. 16 Figure 2-4: Relationship between Benders' triplet and Decision triplet [47] ................................................................................................................... 41 Figure 3-8: The Australian NEM showing the 5 inter-connected regions [76] ................. 63 Figure 5-2: Comparison of capacity builds and retirements between LDC and Chrono executions .....................................................................................List of Figures Figure 1-1: A 3-pointer high-level thesis work flow ..................... 64 Figure 5-3: Wind penetration levels for Chrono and LDC simulations ................. 42 Figure 3-9: Shift towards renewable energy sources in the last decade [79] ........ 69 Figure 5-6: Capacity builds in the different scenarios ........ 40 Figure 3-5: Optimal mix and level of capacity .......... 6 Figure 2-1: Moore's law and the Intel chip evolution in the past four decades [15] ............ 67 Figure 5-5: Simulations showing sensitivity of price with reserve margins .................................................... 71 Figure 5-8: Publicly announced expected capacity additions in South Australia ............................... xi vii ............. 9 Figure 2-2: A basic modern processor configuration [22] ............. 40 Figure 3-4: The Spanish wholesale market after liberalization [3] ............................................................................................................................................................................................................................................................................................... 29 Figure 2-6: Load Duration Curve representation of Figure 2-5 ............................................................... 32 Figure 3-1: Regulated electricity framework ......... 29 Figure 2-7: A 12-block approximation of the LDC using least-squares method ................................... 65 Figure 5-4: Production outcomes incurred from investment decisions ......................................... total capacity and reserve margin .................................. 30 Figure 2-8: Chronological representation of the load profile using 50 blocks ............................................... 38 Figure 3-3: The Australian wholesale market reserve margin and peak prices after liberalization [3] ........................ 35 Figure 3-2: Participant stock and flow diagram in a liberalized electricity framework [56] ................ 11 Figure 2-3: Capacity expansion planning optimization [37] ....................................................................... 41 Figure 3-7: Excess capacity with optimal base-load ...................................................................................... 41 Figure 3-6: Right capacity with sub-optimal base-load ......................................................................... 52 Figure 5-1: Base model simulations showing the input peak load...................................................................................................... 44 Figure 4-1: Bull’s eye representation of the SA model .........................................................................................................................................

....................................... 66 Table 5-2: Comparisons of computing demands for LDC and Chrono simulations ...................................................................................................List of Tables Table 2-1: Comparisons of grid and cloud computing ....................... 48 Table 4-3: Description of variables used to define inter-temporal constraints ................................................ xvi Table 8-7: Notional LRET targets for South Australia ..................................................................... 53 Table 5-1: Successful wind penetration levels attained by 2010 compared with simulation results ....................................... xix viii .................................. xvii Table 8-8:South Australian Winter maximum demand projections [79] ................................................................................................................................................................................................................ 50 Table 4-4: PLEXOS input objects and properties ..................................................................................................... 74 Table 8-1: New entrants build Costs ($/kW) 2010-2030 [12] ............................ xii Table 8-2: Input parameters for new entrant technologies [12] ................... xiii Table 8-3: New entrant gas prices 2010-2030 [85] ............................................................................................................. xiv Table 8-4: Hypothetical improvements in heat rates (GJ/MWh) for new entrant thermal plants [12] .................................................................... xix Table 8-12: Demand-side participation (DSP) set at different RRN prices for South Australia [80] ................... xiv Table 8-5: Fossil fuels and their GHG production rates from combustion [85] .......................................................... 14 Table 2-2: Formats for a typical minimization linear program ......................................................................................................................................................... xviii Table 8-9: Summer maximum demand projections [79] .................................... 17 Table 4-1: LT Plan key formulation elements ............ xviii Table 8-10: Energy projections between 2010 and 2020 [79] ....... 47 Table 4-2: Some common problem variables used in LT Plan ................... xviii Table 8-11: 2009-10 base year profile [79] ........... xvi 2 2 Table 8-6: CO price trajectory ($/tCO -e) for financial years ending in 2030 [80] ........................................................................................................................................................

Acronyms & Abbreviations AEMO CCGT CCS Chrono CEP CF CMOS CPT DP DSP EGS ESOO FO&M FOR GHG HPC HSA IaaS IEA LCOE LDC LP LRET LT MD Australian Energy Market Operator Combined Cycle Gas Turbine Carbon Capture and Storage Chronological Capacity Expansion Planning Capacity Factor Complementary Metal-Oxide Semiconductor C02 Price Trajectory Dynamic Programming Demand-side Participation Enhanced Geothermal System Electricity Statement of Opportunities Fixed Operations & Maintenance Forced Outage Rate Greenhouse Gas High Performance Computing Hot Sedimentary Acquifers Infrastructure as a Service International Energy Agency Levelized Cost of Electricity Load Duration Curve Linear Programming Long-term Renewable Energy Target Long-term Maximum Demand ix .

MILP MLF MSL NEM NPV NTNDP OCGT OR POE RAM RHS RRN SA SRMC UC USE VO&M VOLL WACC WUR Mixed-integer Linear Programming Marginal Loss Factor Minimum Stable Level National Electricity Market (Australia) Net Present Value National Transmission Network Development Plan Open Cycle Gas Turbine Operations Research Probability of Exceedence Random-Access Memory Right Hand Side Regional Reference Node South Australia Short Run Marginal Cost Unit Commitment Unserved Energy Variable Operations & Maintenance Value of Lost Load Weighted Average Cost of Capital Wind Utilization Ratio x .

while serving power to the public in a robust and reliable manner. Heat Rate: This measures the rate of conversion of energy from the fuel to electric output (total fuel consumed/total generation) in GJ/MWh. specific requests. etc) Generation Capacity: This is the amount (in megawatts) of electricity that a generating unit can produce under nominated conditions. It denotes the thermal efficiency of generating plants. to meet the system load. transmission line. Economic Dispatch: This is the short-term determination of the optimal output of a number of electricity generation facilities.Definition of Terms Auxiliary Increment (Aux Incr): This describes the auxiliary loss per megawatt of generation in a station. Demand-side Participation (DSP): A situation where customers vary their electricity consumption in response to. It is similar but different from Unit Commitment (UC). Cache: A relatively small high-speed memory (usually situated within the processor) that improves computer performance. a tax) would achieve the same abatement as that targeted by the mitigation measures actually in place. which if implemented directly (through say. It is computed from the auxiliary use which denotes the total of all station auxiliary loads or in-house energy consumption. or a change in market conditions such as spot price. It is defined as the social cost of emitting a marginal tonne of carbon or the social benefit of abating a tonne. This may vary due to a range of factors like weather where most plants have higher capacities in the cold winter periods than in summer. transformer. Carbon Shadow Price: It is the notional price. at the lowest possible cost. Capacity Factor: This percentage measures the utilization of the generation resource over a period of time. Forced Outage: An unplanned outage of an electricity transmission network element (generator plant. xi . It is defined mathematically as Generation over a period/ (Total Capacity x time).

These include solar generators and wind turbine generators. that a maximum demand (MD) level will be met or exceeded (for example. Marginal Loss Factor (MLF): This is a multiplier used to describe the marginal electrical energy loss for electricity used or transmitted. Unlike the permanent storage mediums. Non-zero Coefficients: It indicates the size of the problem in the mathematical formulation reached by the linear program.Integer: Defined as a whole entity in its complete integral state Integerization: It is a term used to describe enforcement of infrastructure builds/retirements to remain as integer quantities in capacity expansion planning. the RAM is volatile. It could also be applied to unit commitment optimizations to ensure unit on/off decisions are integer-enforced. Levelized Cost of Electricity: This is the lifetime discounted cost of a generating asset expressed in cost per unit of power generated. loading or executing programs and for temporary storage and manipulation of data. RAM: The RAM is the portion of a computer’s memory that’s used for creating. a very important factor which to a great extent determines the ability of computers to solve intensive problems. as a percentage. It refers to the number of non-zero entries in the matrix A and is proportional to the size of the problem. hence contents are lost when power is turned off. Minimum Stable Level (MSL): the lowest capacity (MW) at which a generating unit can produce electricity without any significant technical difficulty. Interconnector: A line or group of transmission lines that links the transmission networks in adjacent regions. due to weather conditions or other economic factors) in a particular period of time. dispatch economics usually determine if the unit generates at or above the MSL. Probability of Exceedence (POE): The probability. Ramp rate (up/down): The rate (MW/minute) at which a unit is able to change between generation output levels above the MSL xii . Intermittent: A term used commonly in this thesis to describe generating units which outputs are not readily predictable.

each region’s annual USE can be no more than 0.) involved in bringing a unit from an offline condition to any output level above the MSL. Short-run Marginal Cost (SRMC): This is the change in total generation costs recorded per unit change in the quantity of power produced by a plant. etc. DSP. Under the provisions of the Reliability Standard. demand-side participation (DSP). Run rate (up/down): This is the rate at which a generating unit ramps up/down generation level from an offline condition to the MSL and vice-versa (MW/minute). labour. WACC is the minimum return that a company must earn on existing asset base to satisfy its creditors. Start-up costs: This accounts for the expenses (fuel. owners. xiii . Unserved Energy (USE): This defines the amount of energy that cannot be supplied due to insufficient generation capacity.Reliability of Supply: The likelihood of having adequate capacity (generation. or both) to meet demand. and other providers of capital. Unit Commitment (UC): This refers to a sequence of generator on/off decisions made over time (usually in the short-term). emissions. meaning that a generator may start-up faster when in hot state (within <8 hours of shutdown) than when in a cold state (say >48 hours of shutdown). or network capability to meet demand. and cold states. WACC: The Weighted Average Cost of Capital describes the rate that a company is expected to pay to finance its assets. warm. It seeks an optimal and feasible combination of on/off decisions for all generating units across a given horizon. WACC is only applied to LT Plan where it is used in combination with Economic Life to compute an annuity equivalent to the defined Build Cost.002% of its annual energy consumption. This is defined for the pre-conditions like hot.

1 . across the United States. Europe. Fundamentally.1 INTRODUCTION World energy demand has grown consistently over the past decades. 6]. 5. For varying reasons ranging from energy security to environmental concerns. continues to draw attention towards improving the techniques that aid long-term planning and decision-making in electricity markets [6]. While this restructuring is being carried out to accommodate the complexities of economically and reliably meeting demand in a carbon-constrained world. If these forecasts are to be taken seriously then there is enough reason to focus on improving decision-support 1 See IEA’s World Energy Outlook 2011 on *89+. In similar terms energy demand and CO2 emissions could double by 2050 [1]. electricity markets over the world have experienced various forms of restructuring over the last 20 years tending mainly towards a more liberalized framework [3] such as in the United Kingdom. the obviously constrained storability of electricity. Australia and China within the last decade. a path unarguably unsustainable if this demand is to be met using conventional means alone. Key findings of the IEA Energy Technology Perspectives estimate investments in electricity infrastructure of up to USD 32. the dynamics and uncertainties of liberalized markets add to the difficulties in matching supply and demand of electricity especially in the long-term [3. California as well as in Australia among others.8 trillion over the next 40 years [1]. 6].1 Global electricity demand according to the International Energy Agency (IEA) is expected to increase by more than 200% of the 2007 level in less than half a century [1]. albeit still a highly preferred energy carrier [4. yet one-fifth of the world’s population are currently without access to electricity. many countries have encouraged investment in renewable energy technologies which has resulted in major installations of wind farms especially. Capacity expansion of electricity infrastructure just like most energy expansion planning exercises involves sophisticated modelling of demand forecasts in tandem with various sector-wide economic parameters given the huge amounts of investment and the long lead times involved [8]. New Zealand. Addressing the global growth in electricity demand while gradually moving towards a low-carbon economy has led to an increasing reliance on renewable energy sources such as wind and solar energy [2]. However.

and environmental externalities). Following the increasing share of intermittent generation in various parts of the world. approximating demand using the LDC approach. has proven sufficient over time given the fairly predictability of output from 2 . 1. long term planning has been commonly carried out using an aggregated but computationally efficient data representation method – load duration curve (LDC) [7. In theory the more detailed a model is able to account for uncertainties. Ku [7] views capacity expansion planning as long term investment decisions made based on short term optimal operating solutions in response to the immediate changes in the system. the bigger the problem formulation becomes and subsequently the more accurate results are expected. economic life of infrastructure. The overall objective of minimizing total costs in the midst of uncertainties inherent in long-term planning can involve conflicting mini-objectives of minimizing expected total system costs (inclusive of social cost of unserved energy. as well as levelized electricity prices [7. the effects of short term properties like unit commitment and economic dispatch as well as medium to long term inputs like build that will aid in achieving minimal total costs of investment while maintaining adequate reliability hence avoiding consumer price hikes as much as possible. where chronological load profile is arranged in hierarchy of magnitude. 9]. 8] among other issues. excess capacity. modelling techniques used in capacity expansion planning (CEP) are being asked to cope with the complexities of the different technologies that are being integrated into electricity grids.8]. Historically. but the size of the problem formulation is significantly constrained by computing performance.1 Problem definition and motivation Electricity generation accounts for a third of total worldwide fossil fuel use and contributes about 41% of global energy-related CO2 emissions. In other words. For instance. outage and maintenance rates. accurate decision-support models for electricity planning have been constrained by computing power [7. among others are all factored into maximizing investment decisions. hence efforts to significantly curb GHG emission will no doubt be achieved through a transformation of the sector [1]. Even with the fairly predictable properties of conventional sources of generation there had been various levels of compromise between model detail and computing requirements [7]. Due to computational limits. New methods are expected to maximize computing resources within their physical constraints to ensure the highest possible accuracies for various purposes.

2 Objective and scope of the Thesis Recent proposals in Australia bordering carbon pricing and issues surrounding the Green Grid in South Australia [11] for instance are being debated for various reasons including doubts to the credibility of modelling outcomes. There are no doubts whatsoever that the electricity mix is gradually changing (with preference given to cleaner but unorthodox technologies like wind turbines). In contribution to the veracity of the foundations upon which decisions will be made towards a sustainable energy path. Retaining the chronological information of detailed models in long-term planning is fast becoming indispensable if unit commitment decisions are to be considered [6. 72] as well as the relative paucity of information devoted to modelling investment in electricity systems with different competition levels [6.conventional thermal systems [7. This thesis will not take into account the result of imperfect competition in the market. More so historical trends where single processor performance upgrade was paramount are tending towards parallel multi-core systems [10]. nevertheless it opens up prospective research work helped by the possible benefits of chronological modelling that can be captured with available expected future computing developments. 8]. It is in this light that this research looks into the increasing complexity of accurately modelling the growing percentage of intermittent generation by effectively utilizing these advancements in computing. 9] in finding the optimal future technology mix in line with policies aimed at decarbonizing the world economy. and the assumptions such proposals were based on. This method reduces the resolution of system variations such as the intermittency effects of distributed renewables on inter-temporal impacts of outages and commissioning of thermal plants. leading to a loss of resolution that may produce sub-optimal solutions to the original detailed problem. Ventosa et al [6] point out that the few long term modelling of perfect and imperfect competitive markets carried out by authors in their review of literature gave similar outcomes. 14] adds to the motivation to partake in this research area. and at the same time there have been significant improvements in computing performance over the years. this research aims at 3 . The need for new robust tools to adequately assess long-term energy infrastructure planning [71. parameters used. Chronological modelling of the demand on other hand significantly improves the modelling of intermittency effects on unit-commitment optimization of conventional plants [9] but at a cost – higher computational time and requirements. 1.

Monte Carlo simulations. etc. America. Drayton in 2000 [12]. Developed by Glenn R. and stochastic optimization techniques in its framework for providing solutions has continuously given rise to the widespread demand of the tool around the world. cloud simulation services. medium and short term timescales with resolutions as detailed as 5-minute intervals. regulators. 1. PLEXOS’ embrace of cutting-edge mathematical programming. This thesis focuses on answering important questions like:  What share of unpredictable renewable injection in a market is permitted after which more robust and apprehensive modelling technics will be needed in capacity expansion planning?  How do the different levels of renewable integration affect marginal costs of electricity in a wholesale market with and without considering intertemporal effects in the model. and how does it affect investment in other options?  What are the benefits of chronological modelling over the aggregated load duration curve (LDC) approach given the present developments in computing technology and what are the likely trade-offs assuming Moore’s theory holds for the evolution of processing power in the near future? Overall this research aims predominantly at retaining chronological information for production and capacity constraints in a bid to show how decisions could be aided in the long term which could potentially lead to huge savings following future investments paths. scalable data handling. Africa and the Asia-Pacific regions.3 Energy Exemplar’s Next-generation power market simulator Energy Exemplar’s PLEXOS for Power Systems® (PLEXOS) is a proven simulation tool used in power market analysis and design by market and system operators. Powered by the latest commercial solvers PLEXOS’ capabilities include portfolio optimization. data and risk management. Also this report is expected to contribute to the dearth in published literature in this area particularly as regards the interdependencies between operations research. and capacity expansion featuring cost-based analysis.unlocking possible benefits of recent improvements in computing performance and infrastructures for broad purposes. energy planning and the area of computing. Breakthroughs 4 . in no less than 200 sites spanning over 25 countries in Europe. consultants. security constrained unit commitment (SCUC). energy analyst among others. It offers flexible long. market and transmission analysis.

The question of whether new methods are well overdue in the planning process makes the subject of this report and will be investigated over the coming sections. Chapter 2 introduces Moore’s law in relation to the evolution of computing architectures in the past few decades and links the different frameworks to varying computing performance indices. allowing market traders and operators more accurately “anticipate swings of up to several thousand megawatts in wind generation and the corresponding impact on market prices” *13+. Irish Single Electricity Market (SEM). motivation and concepts have been tapped from my experience with the Australian NEM setup. South African ESKOM framework. 1. among others given the immense exposure and support from Energy Exemplar. The foundation of this research work with Energy Exemplar centred on seeking ways to improve not only accuracy of decision support tools but also the credibility of such imperfect but effective techniques. employing high resolution simulations on a developed South Australian test model.4 Overview and Work Flow of Thesis This thesis report summarizes ideas. The compromise between realistically representing electricity behaviour and model tractability is argued while also shedding some light on literatures describing the benefits and drawbacks of retaining chronology in capacity expansion planning. Capacity expansion planning is introduced and linked to the practicality of operations research methods particularly regarding optimization techniques. This research work employs the many benefits of the constantly evolving PLEXOS platform including its use of stochastic optimisation of the growing uncertainties helped by the efficient utilisation of Mixed integer linear programming (MILP) techniques [14]. and conclusions drawn from rigorous electricity market data aggregation and hundreds of simulations carried out over a period of nine months. Although findings and recommendations proffered at the end of this report are drawn from experiments carried out with the South Australian electricity model.enabling the incorporation and conversion of real-time wind-speed forecasts into wind generation forecasts are but some of the recent improvements in PLEXOS. learning opportunities. 5 .With expert support from the Energy Exemplar team this work effectively probes the status quo in long term planning and the orthodox contribution of decision-support tools with respect to technology constraints.

the model assumptions are highlighted while also shedding some light on some scenario developments used in the model. Furthermore. vis-à-vis investment capital and payback responsibilities. Finally. The mathematical representation of the relationship between the model parameters are described showing how PLEXOS optimization is carried out in capacity expansion planning. At the end of the chapter. End Closing Phase: • Analyse results of simulations • Draw conclusions and make recommendations • Finalize thesis report Execution Phase: • Drafting of thesis body • Update Model/database • Develop and simulate experiments/scenarios Initiation Phase: • Propose Objectives • Data aggregation and preparation of model • Drafting of thesis introduction Start Figure 1-1: A 3-pointer high-level thesis work flow Chapter 4 introduces the model objects. The impact of capacity expansion outcomes are discussed in detail. variables and constraints used to design the South Australian electricity framework and ongoing or anticipated policies. citing arguments for present and future generations. the additional constraints that distinguish chronological modelling from the aggregated load duration curve approach are introduced. a case study of the investment trends over the period of a decade in restructured markets is analysed with particular emphasis on the Australian NEM and policies driving the investment patterns observed.In Chapter 3. 6 . the two most distinctive electricity frameworks are compared and contrasted in relation to their explicability using discussed mathematical methods.

including suggestions for prospective research and further investigation. results of the CEP simulations carried out on the described model are compared and contrasted using LDC approximation against Chronological representation of demand. Chapter 6 outlines the conclusions of this research work. 7 . Sensitivity analysis is performed on some key variables to show the model appropriateness for this study as well as reflect impact of regulatory decisions on the framework represented.In Chapter 5. Finding a compromise between model accurateness and tractability is further discussed following analysis carried out for solving CEP problems in chronological fashion. The Appendix summarizes important model data and parameters that make up the South Australian Model. Other hypothetical data included in the model are outlined in the Appendix as well.

The past four decades has seen processor frequency grow arguably in par with Moore’s predictions [15]. security-constrained optimal flow (SCOPF) [17]. Intel’s 4004 microprocessor chip with about 2300 transistors in 1971 kicked off an evolution that has now shrunk more than two billion transistors into single core processors [15]. capacity expansion [7]. Nonetheless the seemingly insatiable growth for more computing power has meant that processor chip manufacturing companies like Intel® and AMD® are leaning towards multi-core processing and network-distributed parallel computing. The application of HPC in power systems operation and planning requires significant computing performance particularly with the need to consider more uncertainties and variables from the liberalization of markets and the growing share of generation from renewables. however that steep growth seem to be stalling in recent times due to thermal constraints with the Complementary metal-oxide semiconductor (CMOS) technology [16].2 A PRACTICAL PERSPECTIVE ON HIGH PERFORMANCE COMPUTING (HPC) AND OPERATIONS RESEARCH (OR) Advancements in computing technologies particularly with the commensurate affordability of processor components and wares have been enjoyed in virtually every work of life [15]. However some arguments [15. widely viewed as cloud computing in recent times. did guide the evolution of processor chip composition during the past 40 years. 20] have reiterated that it didn’t 8 . Some applications of HPC in power systems include real-time “N-x” contingency analysis for power market solution feasibility tests [16]. as well as in weather forecasting [18] whose role in power systems is becoming more critical in short term unit commitment decisions. Moore’s law.1 Moore’s Law and Evolution of Computing Technologies The last four decades has seen a total transformation of integrated circuits which forms the backbone of every processor chip. Within that timeframe processor speed has increased ten-thousand folds from 400 KHz to about 4GHz while the cost of a unit megabyte of memory (DRAM) has reduced in similar fashion to less than a cent from about $400 US dollars [15]. 2. In most ways. which predicts that in roughly every two years the number of transistors which can be economically crammed into an integrated circuit will be doubled [19].

This work does not discuss the validity or otherwise of Moore’s law notwithstanding that it is based on the arguments that the law may no longer hold water in the coming years or within the next decade. The challenge however is that. power requirements. A more recent study by Stutter [20] on the development pattern followed by chip compositions (number of transistors per chip). Note a steep growth between 1995 and 2005 preceded by a steady growth rate in processor speed from 1971. Figure 2-1: Moore's law and the Intel chip evolution in the past four decades [15] 9 . applications will have to be redesigned if there are any chances of taking full advantage of the parallelization benefits multicore processors bring to the fore [20]. clock speed of processors. Hence this thesis looks to discuss the likely effect of the expected flattening of computing performance on computing-intensive applications and the adaptations necessary for the future of HPC applications such as in CEP. and the parallelization of instructions between 1970 and 2010 showed similar and very interesting results.necessarily follow the increase in computing performance as figure 2-1 shows. It also means that the advent of multicore processing has the capability of enabling higher performance computing while keeping power requirements fairly constant. increasing power consumption as well as issues with leakage of current [20. 21]. These plateaux explain the difficulty chip vendors have endured in exploiting greater clock speeds viz: excessive heat generation. the other characteristics in contrast have flattened out right from the early 2000s. Whereas the number of transistors continued to increase in exponential fashion.

and more recently the development of cloud computing. 21. The Intel Pentium 4 is one of such single processors with hyper-threading capability [21]. 21]. with up to 128 cores and 512 cores expected in desktop computers and CPU servers by 2017 [22]. However performance scaling will not only be achieved from the chip vendors alone as single threaded applications have to be re-compiled into 10 .2. 21].3 Multicore Processing This is arguably the driver for high performance computing as the use of more cores per chip mirrors other methods of providing for increased performance via grid computing in the past. This is partly due to coordination and handshaking between the cores and the architecture of the applications running on the parallel processing chip [20]. This means that with more cores (allowing parallel execution of instructions) in a machine the physical limitations posed by power requirements and heat management can be dealt with while boosting performance [20. recent trends have shown an inclination toward a multi-core or ‘many-cores’ era which is being helped by improvements in cache designs and hyper-threading abilities in chips and applications [20. 22]. The hindrances in scalability of performance in single monolithic processors gradually paved way for multiprocessing with the advent of hyper-threading which involves running more than a single thread of instructions in parallel inside a single processor [20]. Over the past four decades performance throughput has been achieved by CPU designers (mostly using single core processors) based on clock rate or speed. These single chip components are built with two or more independent processors onto an integrated circuit die or chip multiprocessor [21] as referred to by Intel Corporation. Common commercially available multicore processors being used presently in desktop applications are mostly dual cores (2 processors on a chip) and quad cores (4 processors). cache size. and execution enhancement [20. In contrast. Say for instance using a dual core chip does not necessarily provide twice the performance of a similar single chip processor. The irony however has been that parallel processing has not really lived up to the expectations in terms of linear gains in performance over the single core likes. 2.2 Single Processors to Parallel Computing Parallel computing and multicore computers are emerging as the preferred option needed to deal with the computational workload from power system models [16] given the physical constraints vendors have had to deal with in improving performance of single processors.

For example. well-written multithreaded applications were expected to offer performance boost of up to 40% in 2005 [20]. hence while some specific cores require 11 . Figure 2-2 shows a modern generic processor configuration showing the relationship between the on-chip Level 1 (L1) Cache and the off-chip Level 2 (L2) Cache in a core. The notion that “Cache is king” indeed summarizes the extreme importance of the on-chip cache size in performance gains by greatly reducing processor latency during data execution and transfer [20]. So far Microsoft® and Apple® operating systems have led the race among operating systems compatible with multicore chip processors [22]. High performance growth in computing is not only reliant on drivers like multi-cores and hyper-threading. The challenge has always been with increasing the sizes of the memory blocks closer to the processor given the relative difference in their magnitudes. Core Processor L1 Cache L2 Cache Main Memory (RAM) Input/ Output Hard Disk Figure 2-2: A basic modern processor configuration [22] With multiple cores expected to compete for cache access it is indispensable that caches may have to be flexible in their configurations. Memory (RAM) ~ 4GB and Hard Disk ~ 500 GB [22].multi-threaded applications to take advantage of the performance gains. Feeding the high-performing cores with the required amounts of data necessary to prevent latency and bottlenecks requires a proportional expansion of on-chip memory and/or faster access to data in memory subsystems *21+. most computer systems have memory configuration of the range: L1 ~ 32KB. L2 ~ 2MB. Depending on the compatibility of the hardware configuration for various purposes.

examples of which include the SETI@home project [23.4 Grid Computing Just like electrical grids where electric current is available for end-use in a pool injected from centralized and distributed plants. incurs proportional negative effects on the environment as a result of its carbon footprints [34]. 34] and the Globus Toolkit [24. Grid computing is an unconventional form of HPC2 which originated in the 1990s after a ground-breaking publication by Ian Foster and Carl Kesselman [24].000 processor cores have been harnessed by over 10. through which about 80.dedicated caches others being shared by groups of cores or globally by all cores will have to be done in such a way that does not counteract the expected gains in performances [21]. Grids have been applied to computationally-intensive scientific and academic problems requiring HPC like in economic analysis. as well as in power systems optimization [29].000 users over a span of 50 countries to provide reliability and scalability for intensive tasks [26]. linked mostly to their electricity demands for powering and cooling such centres [34]. 34]. so also does a computational grid provide computing resources (particularly processing power and data storage systems) for carrying out complex problems [23]. 12 . Accomplishing these needs has been made possible through the use of applications capable of farming out bits of a program to thousands of several heterogeneous computers. Expansion of data centres around the world has threatened to make IT the most significant contributor of greenhouse emissions and one of the largest emitters of GHGs by 2020. the increasing demand in computing power coupled with larger storage requirements and more robust transmission networks to handle complex scientific tasks. Grid computing has served to address two major needs: making IT assets remotely available and cumulating computing power [23]. 25. 2. Another factor driving distributed HPC perhaps from a business and environmental point of view is the skyrocketing costs of maintaining data centres. adopting what has become volunteer computing [24]. producing about 2 Grid computing and the likes of which cloud computing is now born has been referred to as distributed high performance computing (DHPC) systems in the past. This concept has since been embraced as a cost-effective option for tackling CPU-intensive problems in organisations and also across geographical locations. See Coddington [30] for further explanation. climate forecasting [24]. As expected. A specific and perhaps one of the biggest applications of grid computing is by EGEE (Enabling Grids for E-scienceE).

be treated with concern in order not to incur a rebound effect in the energy efficiency of the supposed solution. Hence it is pertinent that the insatiable longing for more computing performance required to optimize operations and decision-making. virtualized. storage. platforms. and perhaps seems the economically astute solution for decision support tools in the long term. Cloud computing offers in addition to grid computing. The ‘cloud’ is increasingly being patronized by companies for its ease of scalability. 28]. and services are delivered on demand to external customers over the Internet”. and software functionalities [27] as value-added services by vendors to customers. business. is the Infrastructure as a service (IaaS). utility models for processing capacity. which provides on-demand access to raw computing power and storages resources [25. in a carbonconstrained world we find ourselves at the moment.5 Cloud Computing This is similar to grid computing but it goes a step further in its method of resource provisioning [35].3% of the total emissions [34]. This I believe is where distributed high performance computing (DHPC) has a huge role to play through more patronage of grid and cloud computing. 2. managed computing power. platform as a service (PaaS). As long as planning of energy systems continues to demand exponential computing power. 28]. reliability and readily available services. One common service offered by IT giants Amazon on its Elastic Compute Cloud also known as the EC2. The IaaS is of the most relevance to this thesis given its provisioning of resources as far as HPC is concerned. Among Stanoevska-Slabeva et al’s [34] review of cloud computing includes a definition that cloud computing “is a large-scale distributed computing paradigm that is driven by economies of scale. a relatively newer service which will outsource functional processes to the vendor and the customers are charged for services delivered [27. Other cloud services on offer include software as a service (SaaS) in which the cloud vendor provides all the support of a particular application accessible by the user through browser-based interfaces such as salesforce. However the success of cloud computing as a viable option for planning and decisions of 13 . in which a pool of abstracted. and the business process as a service (BaaS). cloud computing offers a similar path as does parallel computing. where a sort of value-added computing and application combination is offered on a platform albeit managed by the user.

The fact that many have argued3 that cloud computing evolved from grid computing means that they easily share similarities like their ease of scalability. not diminishing its perceived promise of reducing carbon footprints of the IT industry [35].future power systems [29] arguably will depend majorly on the architecture of modelling applications to harness its infrastructural scalability.1 below. 2. Another obvious similarity of both DHPC systems are their multitasking and multi-tenancy attributes which allows customers to perform concurrent single or multiple applications at various instances [35].6 Grid versus Cloud Computing Questionably two of the most common forms of DHPC being used for computationally complex and data-intensive problems. Some differences between grid and cloud computing are summarized in table 2. grid and cloud computing have a handful of similar characteristics as well as peculiarities between them. network bandwidth and storage utilization fluctuates with user demands and are scaled through load balancing of applications running on separate systems [35]. Table 2-1: Comparisons of grid and cloud computing Grid Computing Means of utilisation [34] Single tasks allocated on multiple servers Cloud Computing Leverages virtualization to compute tasks concurrently on the same server classic usage pattern [34] Level of abstraction [34] Storage Flexibility [35] Typically executes jobs in limited timeframes Exposes higher level of detail of jobs executed More suited for dataintensive storage. CPU. For both systems. uneconomical for small storages Commonly used for support of long-running services Provides more abstraction to tasks More flexible data storage range (1 byte up to 5 Gigabyte) 3 See Staneovska-Slabeva et al [34] 14 .

OR seeks to find ‘a best’ or ‘an optimal’ solution out of a number of suitable practical solutions to any given problem [31]. The relevance of OR in energy planning can be traced to its numerous optimization tools. particularly linear programming. 15 . A typical short term unit commitment problem is shown in (2.2. Non-deterministic optimizations are increasingly being carried out using stochastic programming to account for highly uncertain variables like load demand that could cause different outcomes in complex real-life problems. engineering. The roots of OR are dated as far back as during the world war II when scarce resources had to be optimally distributed. 2.1 Practical Applications of Optimization Tools in Capacity Expansion Optimization simply aims to maximize or minimize given set(s) of function also known as the objective function subject to given constraints [7]. cannot be formulated in the usual precise terms of science”. and its application has since evolved following the increasing intricacy and specialty of organisations from the industrial revolution up to this present time [31]. military and in transportation processes [31. for a variety of reasons. It is frequently used in a deterministic sense where similar outcomes are expected for respective initial states of a problem. Arguably one of the most renowned science breakthroughs of the 20th century. healthcare. Kaufmann and Faure [32] defines OR as “the art of applying precise reasoning to problems which.1). which are now highly computer-based due to the complexity of the tasks involved in real-life problems [31. 31] and can be argued as one of the drivers (alongside other OR tools) for breakthroughs in the processor chip manufacturing industry over the decades4 as far as computing performance is concerned. linear programming still dominates a large share of all scientific computations handled by computers [7.7. 33]. 32].1a) 4 Moore’s predictions *19+ the following decade may have been driven by the demands of OR tools on computing power following the multi-disciplinary applications of OR on growing organizations and economies from the 1950s [31].7 Operation Research Methods Operations research (OR) have applications in all works of human endeavours particularly as it concerns decision making in economic. Minimize: Overall production costs of meeting demand (2.

Optimization methods are well suited to CEP in markets with perfect competition where minimization of cost or net benefit maximization is the objective of the problem [6]. size and complexity of the problem.Subject to: Physical. Capacity expansion planning (CEP) generally refers to determining the optimal location. how much and when the capitally-intensive resources need to be built and/or retired by minimizing expected expansion costs subject to operational and technical constraints [37]. Optimization models typically seek answers to the where. technical. The curves give an illustration of the opposite slopes between the net present values of each investment plan and the minimal cost of operation/production for the corresponding plan in each sub-problem [37]. Depending on the nature. whereas stochastic optimization techniques could be employed to enhance the correlation between the model and its real-life problem through its peculiar modelling of probabilistic elements hence increasing accuracy [7. and timing of new generation and/or transmission builds and retirements. The total expansion costs here involves investment costs as well as production costs of meeting short term demands as shown in figure 2-3. and environmental constraints. Figure 2-3: Capacity expansion planning optimization [37] 16 . etc (2. further optimization techniques like decomposition methods [7.]. 36] may be applied to make the problem computationally tractable and efficient.1b) Such a problem would generally be tackled using optimization tools like linear programming or dynamic programming. The investment decisions are more based on economics whereas the production cost reflect not only economics but also reliability criteria of the system. 33. capacity.

additivity. satisfying the certainty assumption is hardly the case hence the wide application of sensitivity analysis [31. that most replicates a mathematical model [31]. divisibility. LP utilizes some mathematical assumptions like proportionality. In a CEP problem. the objective function (usually represented in the form ∑ ) would typically comprise minimizing NPV of costs of generator and transmission resource builds 17 . 36] to obtain an optimal solution without violating any of the binding constraints.2. and certainty or determinism [31. An example of these formats for a minimization linear program from Bazaraa et al [36] is written as shown in table 2-2. after which an appropriate mathematical algorithm solves the model. Typically aiming to maximize or minimize an objective function.7. Table 2-2: Formats for a typical minimization linear program Standard form Minimize Minimize Canonical form ∑ ∑ subject to subject to ∑ ∑ All constraints are equalities (=) and all All constraints are of the inequality (≥) type variables are nonnegative and all variables are nonnegative.1 Linear Programming (LP) Linear programming comprises the ‘planning of activities’ to achieve an optimal result. While the linear formulation of most practical models satisfy majority of these assumptions.1. A typical linear program is pre-formulated into either standard or canonical formats depending on the nature of its variables and the constraints [36]. among reasonable options. 7].

18 . Its tendency to approximate or round up discrete elements like the capacity of generating units or those representing integer or binary on/off decisions. The inability of LP to accurately model non-linear effects like economies of scale and reliability speaks of its rigid linearity conditions 3. The earliest applications of optimization in the 1950s for capacity planning were modelled using linear programming to find least cost expansion solutions within constrained operational boundaries [7. The constraints would generally include supply/demand adequacy. However with over half a decade past. mixed integer linear programming (MILP or MIP) is fast becoming the preferred method for aiding decision-making as far as capacity planning is involved [37]. makes the solution less accurate 2. Recent improvements to the LP theory now permit automatic recovery from infeasible problems whereby the supported solvers are able to efficiently relax some constraints in order to repair the infeasibilities [41]. minimum stable level.and/or retirements. Uncertain input variables like demand profiles as well as climate conditions which generally determine the generation profiles of renewable plants aren’t well modelled by linear programming 5. In summary some major shortcomings of linear programming with respect to CEP that make it less attractive as a stand-alone method include the following [7]: 1. capacity reserve requirements (based on forced outage and maintenance rates of the plants). and other system technical restrictions like transmission line capacity. LP cannot cope with the multi-staged nature of CEP due to its inability to handle uncertainties. min uptime and downtimes. and business risks 4. as well as social costs of unserved energy. and so on. fuel costs. environmental externalities. 14]. It is inappropriate for handling the probabilistic nature of forced outages. other fixed and variable maintenance costs. as well as non-linear constraints that define power flow equations [37]. However one key challenge that linear programming faces in solving CEP problems is the presence of integer variables associated with investment decisions [37] or unit starts/stops decisions [43] for instance. emission constraints.

If the relaxation does not meet the integer requirements the branch and bound method picks one of such variables and ‘branches’. 2. 31]. the sub-problems are solved and the process repeated to satisfy all the integer variables [37]. Its properties are based on Bellman’s principle of optimality [7. 19 . and (5) above are treated more accurately. of course at exponential computational costs [37. 38].3 Dynamic Programming (DP) Dynamic programming is a mathematical technique which is able to solve a sequence of interrelated decisions that are combinatorial in nature through a recursive method [7. This ensures that some limitations of LP as described in (1). 32] which states that: “A policy is optimal if. MILP has been proven to provide robust optimization for CEP purposes and is widely used in major energy planning applications like PLEXOS [37] which is being used to carry out this research. to start or shutdown plants. etc. at a given period.2. PLEXOS uses commercial solvers such as IBM’s CPLEX and MOSEK ApS’ MOSEK [12] among others for its optimization problems. To reduce the computational burden MILP-based models employ heuristics as well as the branch and bound technique. (2).7. The branch and bound algorithm works by adopting a ‘wishful approach’ that ignores the integrality constraints at the start and hopes that the LP relaxation solved would meet the necessary integer requirements [37. creating sub-problems with the integrality constraint of the variable hardened.7. the decisions still to be taken constitute an optimal policy. regard being paid to those which have already been taken”[32].1. whatever the previous decisions have been.2 Mixed integer linear programming (MILP) This is an enhanced form of linear programming which is able to handle problems where some of the decision variables are restricted to integers in the optimal solution [37]. For instance binary decision variables (whether to build or not to build. An MILP generally expands the scope or size of an optimisation problem by the inclusion of integrality constraints which otherwise would be treated by a linear relaxation (LR) program.) makes CEP a combinatorial optimization problem whose solution space grows exponentially with the variables [37].1. One of the inherent advantages of MILP is its ability to take advantage of multithreading or multi-processing technologies [41] provided by some of the latest solvers. 7]. 31.

in which case the solution proceeds in a backward manner finding the solution at the initial stage. Recent applications of DP in capacity expansion still face the curse of dimensionality as a result of the computational strain such models place on present processing systems. as well as minimum stable limits for individual generators improves execution times significantly for models dealing with unit commitment decisions. Each stage is defined by a finite or infinite states representing the possible conditions the system could take at such stages. The policy decision at each stage serves to “transform the current state to a state associated with the beginning of the next stage” with the optimal solution of the overall problem expected to be solved at the final stage.  Possess a recursive relationship that identifies the decision for stage . as well as in its relatively improved handling of demand and cost uncertainties [7]. Aside its dimensionality constraints. more flexibility in handling nonlinear approximations and convexity requirements. DP is characterized by the way its problems are handled. a phenomenon widely referred to as the “curse of dimensionality” *7. To 20 . DP’s consideration of different states and their combinatorial effects within every stage has serious implications on the computational efficiency of its problem. dynamic programming starts by solving a sub-problem for its optimal solution and gradually expands the problem by finding the following optimal solution from the preceding one until the problem is solved completely [7. It’s advantage of directly resolving intertemporal constraints like minimum up and down times. Dynamic programming overcomes some of the challenges of LP in its ability to handle capacity constraints of individual generating technologies. is available.Unlike linear programming. although this advantage diminishes with increasing number of units in the system treated using DP algorithm [41]. 31+. given the decision for stage . Hillier and Lieberman [31] characterizes DP problems as follows:    They are divisible into stages where decisions are made for every stage sequentially. optimal solutions for the remaining stages are independent of decisions adopted in preceding stages. This way. Furthermore. DP is still not ideal for handling uncertainties in capacity expansion and its sequential method of optimization does not allow for effective handling of multi-stage decisions [7]. 31].

Real-life problems including CEP applications present linear programs with millions of columns and rows which represent the variables that need to be reduced into sub-problems of manageable sizes. 33. Hence the later publications have described the decomposition principle as a way of systematically solving complex linear programs by isolating general constraints from specific constraints which are solved separately in two sets as the master problem and the sub-problem respectively [36]. F. Benders in 21 . 36]. decomposition is not an entirely new concept.1 Benders’ Decomposition Benders’ decomposition is a technique that exploits mathematical problems with a special structure called “complicating variables”. [39] and [40] have treated decomposition techniques as reinforcements to linear programming problems. as the name implies. 38] among others. In general. Another method of breaking down solution complexity include the branch and bound technique [37. and Langrangian relaxation [36]) are but some common ways of handling such problems. decomposition techniques have ensured that some previous challenges of linear programming such as its inherent inefficiency in handling nonlinearities and multi-stage planning [7] as well as in stochastic optimization of linear programs [ Decomposition Methods Decomposition. As one of the approaches for solving optimization problems. 39. refers to the breaking down of large complex problems into smaller problems for better tractability and more efficiency while preserving the focus of the problem [7. 2. DP algorithm applies some form of heuristic rules to simplify problems by way of eliminating some feasible states which may affect the accuracy of the decisions reached [37]. 2. 47]. the problems are then made significantly more tractable by temporarily fixing these variables [39. Ku [7] portrayed decomposition methods as an alternative to linear programming whereas more recent publications by [36]. STRATEGIST energy modelling software reduces the computational burden on DP problems by specifying a limit to the feasible states that is treated in single years of a capacity expansion problem [37].7. As an example.g Dantzig-Wolfe technique [36]. Decomposition methods (e. 48]. It stands out from the other decomposition techniques for its flexibility in breaking down large problems functionally and temporally. Benders method [7. 40] are overcome.account for this. This method of decomposition was proposed by J. an attribute that makes its application very wide spread in power systems decision problems [47].

a characteristic [47] referred to as linear coupling between the master and sub-program. Hence it offers a lot more computational efficiency (due to its ability to exploit parallel computing).3b). its generalized form makes it relevant to different types of decision problems (such as in power systems operations. ̃ is an ( ) (2. integer or continuous forms) [47.4a) (2. as well as the logic-based Benders’ decomposition and the combinatorial Benders’ decomposition [39].3b) (2. Applying the Benders’ decomposition as described by [47] shows a general problem of the following structure: ( ) ( ) ( ) This problem can be represented as a two-stage problem of the form: 1st Stage: ( ) ( ) The master problem decides on a feasible ̃ (2.4b) considering constraint (2. 49]. Other forms of Benders’ decomposition have been discussed based on their applications across different fields and include the stochastic Benders’ decomposition [40]. and its flexibility and scalability makes it ideal for integrating into existing applications [47].3a) (2.1962 (hence the name Benders’ decomposition) and reviewed by Geoffrion [48] a decade later creating a method now known and applied across various industries as the Generalized Benders’ decomposition [47].3c) approximation of the optimal value from the 2nd stage as a function of the 1st stage variable 22 . maintenance scheduling and in planning). known as Benders cuts to the master problem [39]. 48] and a sub-problem (which may be a linear or nonlinear convex program) that serves to feedback linear constraints. non-linear. This thesis however emphasises the generalized Benders’ decomposition method which has been key not only in power systems decision problems but specifically in its algorithm similarity with CEP problem formulations [47. The generalized Benders’ decomposition algorithm decomposes large-scale mixed-integer programming (MIP) problems into a master problem (which could take linear.

6b) represents the relaxation of the reliability constraint In CEP. operation violation.5b) considering the initial constraint (2.3c) is satisfied based on the decision . 5 Benders’ feasibility cut is a constraint that is added to the master problem to enforce necessary conditions for feasibility of the primal sub-problem [39].5a) (2. This relationship is represented in a high level problem form thus [47]: (2. If the solution is not optimal.6a) (2. a feasibility cut5 is added to the master problem and it is then re-solved.. and is a lower bound of the initial problem (2.3a) and is updated iteratively by the 2nd stage problem. and so on. 6 Similarly. reliability. a slack vector is introduced to test the feasibility of the sub-problem. The generalized Bender’s decomposition is well amenable to power system decision problems which typically try to optimize three conflicting objectives in economy. the Benders’ optimality cut is added to the r elaxed master problem based on the optimality conditions of the sub-problem [39] 23 . To check if constraint (2. In this case the feasibility cuts feeds back to the master problem infeasibilities surrounding reliability constraints such as load curtailment.3c) with the from the 1st stage problem. If any violations occur in the subproblem. while the optimality cuts informs the master problem how to adjust the guess of the second stage problem [47]. and risk as shown in figure 2-4 [47]. 2nd Stage: ̃ ( ) ( ) The sub-problem decides on a feasible given (2. an optimality cut6 is added to the master problem and it is re-solved.6b) Where “tolerance” in (2. These iterations are repeated as new feasibility and optimality cuts are generated until the process converges to an optimal solution in a finite number of iterations [39]. the master problem determines the optimal investments in new capacity infrastructure while the sub-problems serve to determine the minimum cost and reliability of the trial system in each period (usually in years) of the planning horizon [49].

hence leaving a lot of positives yet be leveraged with the Benders’ decomposition as far as parallel computing continues to evolve into the future. Its application in generation planning using the Electric Generation Expansion Analysis System (EGEAS) to adequately estimate incremental costs of meeting allowed unserved energy reliability targets was acknowledged by the International Atomic Energy Agency (IAEA) [8]. 24 . a stochastic integer programming (SIP) problem is formed where any of the first or second stage decisions must be integers. classified as “here-andnow” is taken before the random events are treated after which the operating (second stage) decision vector y are taken in a “wait-and-see” approach [7]. as well as non-dispatchable generators. each service in the decision triplet can typically be functionally-decomposed. 2. and load management services.3 Stochastic Programming Mathematical programming techniques are ideally deterministic in nature [42.Generalized Benders approach has been proven to suit analyses involving thermal units. limited energy and storage units.7. In this context. Linear programming has been used to model uncertainty right from the mid-1950s as a two-stage form in what is now referred to as stochastic programming with recourse [7]. Also. Figure 2-4: Relationship between Benders' triplet and Decision triplet [47] The decision triplet is time-decomposed in an optimization problem as they can be treated separately for different periods of the horizon. the first stage investment decision vector x.] making them relatively less credible for making decisions that involve many uncertainties. This is where stochastic optimization comes into play which adopts a random approach towards making decisions that are based on probability distributions of uncertain variables. A decision taken in the first stage is followed by a sequence of a random event and then a second stage (or recourse) decision that compensates for the effects of the first stage decision [7. 43]. Just like LP.

which feeds uncertain data denote real and integer values respectively represent the non-anticipativity constraint which guarantees that the first-stage decisions are identical across all scenarios Stochastic optimization has applications in all phases of energy planning such as in Long-.7) Where:      are nonnegative integer with represent first. This assumes that the distributions of the random parameters are represented by discrete finite scenarios * probabilities * +. with +. This form of Stochastic optimization decomposes all possible paths (or scenarios) of a problem based on discrete probability functions which they follow [43]. wind speed. can be modelled across a number of S samples. uncertain inputs w. etc. That is to say. a first-stage decision to build or retire generating and transmission infrastructure at a certain time is optimized against S samples of discrete scenarios reflecting possible outcomes that could affect second-stage decisions like economic dispatching of the 25 . Minimize: ∑ Subject to: ( ) (2.. and short-term scheduling. The equation (2.and second-stage decisions respectively The parameters ( distribution ) are actual realization of the random event with known to the second stage .One application of the two-stage SP in CEP is the scenario-wise decomposition. natural hydro inflows. fuel prices. For instance using simulation methods like Monte Carlo (see extensive literature in [45] and [46]). like load. in practice limited by computing memory [43]. in a long-term planning or CE problem.7) is a standard representation of a two-stage scenario-wise SIP formulation [44]. medium-.

or description of an imagined situation or sequence of events” which could include a synopsis of future hypothetical incidents. weather conditions to seasonal and climatic evolutions. and a scientific model intended to account for such imaginary occurrences. 2. hence such vulnerabilities can be evaluated and contingency plans elaborated to control the risks [37] or exploit the opportunities that may surface. It involves the construction of each 26 .8 Dealing with Uncertainties and Imperfections inherent with Decision Support Tools Decision making in practice is subject to different sources of uncertainty regardless of the magnitude of the impacts of such decisions. however parallelization of the optimization process by most solvers on multicores ensures that such problems are not necessarily S times less tractable. models that try to mimic reality are only simplifications of the many uncertainties that abound in real-life decisionmaking. As a result. as well as the economics of energy prices over time. coherent and relevant set of scenarios in order to represent different visions of the future. Some ways these uncertainties have been dealt with particularly for long-term decisions include the use of scenario analysis and sensitivity analysis. with the objective to analyse the impact and evaluate the risk of each scenario over a system or a particular project”.resultant capacity mix. In the same vein. 2. the course of action to be taken. These uncertainties for instance stem from input data to a model (data uncertainties). a broad prediction of possible outlooks can help identify where a system or project being modelled is more vulnerable. these uncertainties abound and range from demand variations to future demand growth rates. In an energy planning exercise.8.1 Scenario analysis The Oxford English Dictionary defines a scenario as “a sketch. parameters used in simulating the model (parameter uncertainties). Hence the problem becomes S times larger than a deterministic case [43]. Ku [7] gives a more detailed literature review of the origin and applications of scenario analysis with more emphasis to capacity expansion. Scenario analysis is described in [37] as “…the construction of a possible. and the approximations of reality that such a model represents (model uncertainties) [50]. outline.

or even the public who eventually bears the effects of decisions made following output of a model. especially when used alongside other processes like scenario analysis and perhaps risk analysis7. and then assessing the implications of each scenario [7. Bertsch et al [50] focuses on testing the sensitivity of parameters for multi-criteria decision analysis (MCDA) models.scenario to reflect a possible future outlook. the model parameters. Also its inability to handle multi-staged simulations and characteristic sequential handling of factors. An example of a scenario analysis using modelling tools is the development and assessment of the Australian Large-scale renewable energy target (LRET) in the NEM. some have argued a few weakness of this process. I introduce sensitivity analysis here for the benefit of understanding its purpose and importance towards arguments that will be based on results of a decision support tool which will be used for this thesis. Ku [7] argues that sensitivity analyses are only rigorous enough to validate deterministic models in particular. However the fact that it is common place amongst most experts that models are probably never validated but rather known to withstand a number of ‘tests’ [51] is one reason to argue for the relevance of sensitivity analysis. as well as the overall effectiveness of a model for a particular purpose. Saltelli et al in [51] defines Sensitivity analysis as a “study of how uncertainty in the output of a model (numerical or otherwise) can be apportioned to different sources of uncertainty in the model input”. A method to perform sensitivity analysis to deal with data uncertainties is explicitly described in [52]. among others make sensitivity analysis unideal for use on its own [7]. 27 . It can be carried out to screen input and output data for a model. 7 Risk analysis is concisely described in [7]. 2. A scenario could be constructed to evaluate the effect of meeting the overall LRET target in 2020 through a fifty percent contribution from investments in Wind generation in South Australia. sensitivity analysis is more concerned with identifying the relative effects of the various components of a decision support process. 37].2 Sensitivity analysis Unlike scenario analysis that tries to deal with uncertainties by evaluation of hypothetical future occurrences. As important as a sensitivity analysis is towards the users and potential users of a particular tool.8.

daily). and computational tractability. The most important factor and of course one peculiar to this industry is the relatively non-storable nature of electricity.6. Coined from [41] 28 . As an approximation of the temporal characteristics of the load profile. but not to address these chronological constraints. 74]. and minimum up and downtimes at all. With the growing share of intermittent renewable sources of generation across the world. the LDC does not model unit commitment decisions and inter-temporal constraints like ramp-rates. there is increasing focus on the short-term temporal load variations in CEP to ensure that reliability is not just achieved but at the least cost.3. start-up costs. meaning that the uncertainty in amount of generation from wind and solar plants have to be known beforehand to be included in the LDC formulation upfront. This implies that costs and supply availability depend solely on magnitude of load and not on the time at which the load occurs [7]. relative accurate representation of seasonal effects. seasonal) or long term is arguably the most significant data in modelling exercises. discussed in [9] is by subtracting the total renewable generation from the load before the LDC is created in the simulation run. For its efficiency. This makes planning for capacity expansion for electricity industries a herculean task owing to the significant effort put towards adequate representation of load over long periods. This method however has been criticised for not taking into account the probabilistic nature of such intermittent generation. 73]. Figure 2-5 shows a half-hourly chronological load profile for South Australian demand in the month of March 20119 with its LDC representation shown in Figure 2. One method of accounting for the renewable intermittency. The support tools are able to build LDCs by dividing and reordering the chronological load profiles into different time periods according to the probabilities of particular loads being exceeded [37. hence the short-term chronology needed to capture time-scale relationship between consumer load and the growing intermittent generation is not preserved [37. 8 9 The effect of capacity imbalance is discussed in section 3.2. load duration curve (LDC) approximations have been widely adopted in support tools for modelling load demand. medium term (weekly. monthly. Such forecast may consider many natural and cross-sectoral factors that influence demand such as weather and climatic conditions as well as the elasticity of demand over the planning horizon. meaning that generation is required to follow load variations instantaneously. based on the optimal expansion of capacity mixes8.9 Representation of Load Profile by Support Tools The demand profile for a region whether short-term (periodically.

Figure 2-5: South Australian demand curve for March 2011 Figure 2-6: Load Duration Curve representation of Figure 2-5 Over time the accuracy of the LDC approximation in long term studies have been improved by increasing the resolution of curve representation up to limits of computational tractability. For example earlier models have used one block per LDC per week while a more recent exercise carried out for the New Zealand market used five blocks per LDC per month for a planning horizon of 18 years [37]. PLEXOS uses statistical methods like weighted least squares methods among others for fitting blocks to the LDC as shown in 29 .

30 . This wasn’t the case in the past where intermittent energy sources had insignificant shares in generation mixes.up or down10. run up rates. 11 As revealed by the University of Cambridge Electricity Policy Research Group in [75].figure 2-7. However depending on the size of the problem. retaining chronological information of demand profiles in long-term studies is becoming an area of interest not only to capture the effects of the intermittent renewables on the dispatching of thermal plants. warm or cold states). etc. start fuels. Figure 2-7: A 12-block approximation of the LDC using least-squares method With advances in computing power. but also for more accurate modelling of emissions from fossil plant generation during start-ups and run. For instance modelling with one LDC per week obviously approximates the load better than with one LDC per month (using the same number of blocks). under hot. It is possible to capture more intertemporal properties like start and shutdown costs (reflecting generator preconditions say. emissions can be accounted for where different sources of fuels are used during start up as well as emissions from auxiliary startup plants like boilers. Increasing the number of blocks per LDC as well as the concentration of LDCs in the planning horizon improves the approximation to the original load profile. in which case commissioning and decommissioning of plants can only be made weekly or monthly respectively. computation is still an issue as chronologically solving long-term models consumes exponentially more resources. etc. 10 For instance in capturing start-ups of fossil and non-fossil generation. Also a couple of recent literatures have focused on ramp rates alone in considering chronological load variations in their analysis11.

PLEXOS approximates the time-dependant load by fitting blocks into the curves. Figure 2-8: Chronological representation of the load profile using 50 blocks Assuming a 30-day month’s load profile is represented using 200 blocks fitted across the demand then the chronology is only retained up to: This means that roughly 7 troughs of chronology per day is observed in the simulation although the demand slicing uses sophisticated weightings as shown in figure 2-9 where the same south Australian demand is simulated using 200 blocks per month of chronological fitting through weighted least squares method. 31 . the more blocks defined the more temporal characteristics are accounted for in the planning horizon and the more computational resources and time demanded by the model simulation.Chronological method generally requires more blocks than the LDC approach with minimum resolutions of two blocks per day to ensure daily peak/off-peak cycles are captured [41].

32 . In other words. hence with advancement in computing performance notwithstanding more complexity of energy systems. the impact of future investment pathways can be tested using optimization techniques like linear programming. Unfortunately. This will ensure that the “tractability excuse” normally given for dwelling decisions on simplistic and unrealistic models should not be the case anymore. In summary. this chapter has reviewed all areas of literature that relates the importance of High Performance Computing (HPC) to decision making process in the energy industry through capacity expansion planning in electricity systems. one can clearly see that using more blocks is likely to increase the accuracy of the simulation results given that the troughs are better reflected in sliced load representation of fig 2-9 with 200 blocks than fig 2-8 with 50 blocks.Figure 2-9: 200-Block representation of the demand applied in this research Comparing the slicing of the demand curve in Figure 2-8 and 2-9. chip evolution has taken a different turn (multi-processing) which means decision-support tools used a few years ago will have to be re-designed to tap the advancements so far. stochastic programming. The level of input detail modelled is somewhat proportional to the accuracy of the results expected. one would expect critical investment decisions to be based on more rigorous modelling exercises. among others.

33 .In this research the use of time-dependent demand profiling (chronological demand) over aggregated load duration curves (LDC) is used to demonstrate how the present computing systems is able to accommodate more complex and realistic models to aid better decisions.

7. and efficiency gains through economies of scale were the priorities [7]. 58] and require special treatment as will be discussed subsequently in this chapter. oligopoly or in liberalized markets. environmental concerns. 7. The next four decades on the other hand anticipates that up to 20% of the total world energy investments (USD 32 trillion dollars) will be committed to the electricity sector [1]. are some of these characteristics of investment in electricity infrastructures that warrant the best possible decision support. while risks were more or less borne by the end-users [3. 8. long-run uncertainties. 55].3 INVESTMENT DECISIONS IN ELECTRICITY MARKETS Energy policies are being introduced by states and regions around the world for various reasons including improved reliability and security of supply. decisions to invest in generation infrastructure (in particular) are based on decentralized initiatives of private market players [3. constraints. long payback periods. Electricity is arguably the most useable form of energy. and uncertainties of 34 . 72] under such structures. irreversibility of investments. investment decisions were part of centralized regulation of electricity structure geared towards providing electrical energy to customers economically and within acceptable reliability and safety levels [7. This followed the inclusion of environmental considerations sanctioned internationally by the Kyoto protocol in the 90’s and also a widespread restructuring of electricity regulations for better cost competitiveness through deregulation [3. This chapter treats the representation of the wholesale market elements using decision support tools and the implication of the generic frameworks on investment decisions from a benefit maximization point of view. and to exploit the economic benefits of competitiveness in energy markets. risks. but most importantly tend to be influenced by the frameworks under which such markets operate such as in monopoly. perhaps the reason why its market is very closely linked with economic growth and social well-being of a people [1. Traditionally. 53]. Security of supply. The objectives. particularly in electricity generation makes it a worthwhile area for more attention. However in the competitive markets. The huge capital commitments. The past four decades has recorded an average annual growth of 3. 53]. The peculiar nature of investments in energy infrastructures. 7. These investments when analysed individually follow market signals like prices and supply/demand dynamics [54] as one would expect.5% in electricity demand globally [14]. and openness of investment options [56].

the obligation to meet demand at a certain reliability level implies a responsibility of investing in new infrastructure [59]. For a monopolistic electric utility. Figure 3-1: Regulated electricity framework The South African electricity structure (see the IAEA [61] and [62]) where ESKOM plays a monopolistic role is a typical example of a monopoly framework. there is no competition hence the need for government regulation of the monopoly to prevent abuse of power [60]. 3.the monopoly and liberalized frameworks are discussed and reviewed. The different mechanisms currently adopted in these markets and their effects on capacity expansion and investment decisions are discussed focusing on the Australian (NEM) perspective. transmission and distribution of electricity to customers in a region. In a vertically integrated regulated monopoly the utility controls all business functions and is obligated to meet entire customer demand in the region. which like most other 35 . A regulated framework could also have some form of competition particularly at the generation level however monopolistic behaviour usually dominates the retail level [60].1 Regulated Electricity Framework The idea of a regulated framework is very common in a monopolistic system whereby a vertically integrated utility controls generation. Figure 3-1 shows a simplified generic representation of an electricity monopoly structure that illustrates the relationship between a single utility and the end-users or a major market player with monopolistic influence in a market.

57] – one way is through an imposition of cross-subsidized prices on the customers12 [57]. This guaranteed return for investors also hinders technological innovation. Canada. cheaper 12 Monopoly players are likely to adopt a pricing method called ‘cross -subsidy’ whereby their bulk customers are offered attractive cheap prices and the small consumers are charged more to enable recoupment of lost income [57]. In this case exogenous variables like weather conditions and fuel prices bear most of the uncertainty and these could be dealt using scenario and sensitivity analysis to acceptable degrees of confidence [67]. At the time expectations of the benefits of vertically unbundling ranged from introduction of competition among generators. In addition investments in transmission tends towards eliminating congestion entirely which may not be economically and socially optimal for the system [63]. In effect.2 Liberalized Electricity Industry Deregulation of the electricity industries around the world only started to take shape in the late 1980s following Britain’s disintegration of its hitherto vertical structure. With limited competition in the market. 36 . The non-existence of a market means that prices do not accurately reflect supply adequacy. a couple of countries around the world followed suit including Australia. New Zealand. Brazil.monopolies in practice fall. an optimization exercise carried out for the monopolies (being regulated) should yield similar results with one carried out by government regulators (for instance) seeking benefit maximization of all players in the market. This is supported by the fact that uncertainties like load demand growth. Within a decade of the UK’s electricity sector restructure. parts of the United States and some other European countries [7]. The level of regulation in monopolized markets is seen to be critical in the scientific representation of these markets as it reduces a great deal of uncertainties in capacity expansion planning. discount and interest rates. and even future electricity prices are more harmonized giving the planning process more of a deterministic outlook. monopolistic players are less exposed to investment risk in exchange for lower returns while the customers bear the consequences of bad investment decisions [59. a scenario which is unlikely to happen in the liberalized markets where competition breeds incentives for breakthroughs [59]. The relatively less uncertainties involved in modelling regulated systems makes known techniques such as optimization tools and multi-criteria decision analysis adequate for carrying out long term planning. somewhere between the vertically integrated and the unbundled monopoly described in [60]. 3.

The first delay. operation costs.electricity for customers as well as freedom of negotiation with suppliers of choice. prices. 1 represents investment decision delay which is the wait for more information on the profitability of possible investment options while time lags due to permitting and construction times of new capacity is denoted by 2 [56]. horizontal unbundling of supply utilities have more or less been carried out on the generation and retail levels. Future revenue streams are not guaranteed as generators’ earnings are based on cost competitiveness with other generators and also the fact that this framework does not allow investment risks to be passed down to consumers [3]. Due to the complexity of electricity networks. Unlike in the monopolized framework. The stock and flow diagram in figure 3-2 gives the interrelationships among different components of an electricity structure. Whether all of these objectives have been achieved so far in the liberalized frameworks mentioned above remains to be seen. 58]. This framework incurs higher risk profiles to planners who not only have to tend with uncertainties in exogenous variables like fuel cost and demand but also with short-term and strategic behaviours of competitors and the regulatory authorities [67]. The uncertainties and complexity of investments in the liberalized market is not peculiar to the competition alone. however distortions from regulations such as the implementation of price ceilings among others are likely hindrances to these objectives [72]. Ownership and control of transmission and distribution infrastructure in liberalized frameworks is mainly that of the regulatory authority or market operator who have as important a role as the generators in the overall sustainability of unbundled markets. and profitability that each participant in a liberalized market is faced with. It shows a connection between uncertain long-term market variables such as the reserve margins. this of course has to be carried out with limited certainty about the strategic direction of other market players [67]. Regulators have to deal with ensuring that market efficiency is not jeopardised while creating a level playing ground that incentivises participants to invest in generation capacity. Market participants are forced to draw conclusions from price signals and face numerous uncertainties which mean imperfect foresight of future market conditions [3. The more recent need to incorporate a ‘sustainability model’ for the market structure by regulators based on supply security and environmental pollution increases the burden and risks involved in ensuring adequate 37 . decisions to invest and retire capacity are made in a decentralized profit-oriented move by the competitors in the industry. and a better reflection of demand/supply relationships through the adoption of spot markets.

Some common models include the energy-only13 market as adopted in the Australian NEM. Argentina. Other models include the expected price approach and operatingreserve approach discussed in [3]. Modelling these market models are carried out differently regardless of whether it is being done for welfare maximization (from the market operator’s point of view) or for profit maximization (participants). etc. are fast becoming the preferred way of modelling long-term investments in liberalized systems. 13 14 Detailed review of this approach is treated in [3]. and [66]. [65]. The use of the widely adopted multi-agent based modelling techniques as well as system dynamics (discussed in [67]) which are able to capture competitive behaviour among participants. it’s adopted in Spain. and the capacity obligation15. Figure 3-2: Participant stock and flow diagram in a liberalized electricity framework [56] The dilemma of incentivising participants to provide optimal level of investments.reliability levels by the operators [64. Ironically. Same as in 13. 67]. Colombia. used in regional electricity markets around the USA like the Pennsylvania-New Jersey market (PJM) 38 . market dynamics and economic theory which are the basis upon which the liberalized frameworks are proposed appear imperfect due to inherent characteristics of energy infrastructures namely: its investment lumpiness and the non-linear benefits of economies of scale [58]. keeping electricity prices at a minimum and constraining carbon emission while meeting demand at certain reliability levels among others in liberalized markets across the world has forced markets to adopt various kinds of market models. 15 Treated extensively in [65] and [66] and as capacity market approach in [3]. capacity payments14.

however. Capacity over-design or overcapacity has enjoyed the better share of arguments over time and have actually occurred more in practice [58.3 Implications of Capacity Imbalance The objective of an optimal expansion plan is to expand capacity to a (equilibrium) point such that marginal cost exceeds the benefit of retaining the status quo [58]. Here I synopsize the effects of capacity inadequacy and imbalance that need to be considered while modelling long term investment decisions for electricity markets. offers the benefit of potentially exploiting technological improvements leading to financial and/or efficiency gains. intermediate and peak generation) on market prices. Ku [7] and Haynes et al [69] discussed the pros and cons of under. Australian NEM. seems very logical. the relatively cheap cost of foregoing additional capacity due to error possibilities in demand projections. and so on. Kilanc and Or [54] have argued based on experiments carried out. 16 17 See [68] Capacity under-design to an extent forces future generation to pay for the extra capacity they require unlike in overdesign situations where earlier generations bears costs of capacity they might not utilize and hence offers no welfare gains. However the majority notion that competitive frameworks tend to favour under-design decisions while monopoly players tend to exploit benefits of economies of scale leading to overcapacity.e. On the other hand under-capacity allows the flexibility of adjusting to changes in demographic or demand growth profiles. This phenomenon can be shown for example by the decreasing margins experienced in most markets after liberalization such as the PJM. that investments in power markets do not always go in tandem with demand growth and capacity retirements due to imperfect foresight as well as investment decision and construction delays among others. Green [68] discusses the implications of investment in the different capacity mixes (i.16 This reduced margins in most cases forced extreme peak prices in these markets as portrayed in figures 3-3 and 3-4. Aside from the reduced marginal costs of incremental units that come with a larger system size. Spanish wholesale market.3. Nordpool. 39 . 69]. baseload. and also arguably treats inter-generational equity17 considerably hence maximizing welfare gains for present and future generations [69]. There have been a number of literatures comparing the electricity frameworks and their ways of dealing with demand uncertainty as well as their implications on the reserve margins of various electricity industries around the world.and overcapacity from a CEP perspective. and the possible stimulus for industrialization and growth of a region are some of the other benefits of overcapacity regardless of the framework.

Green’s *68+ evaluation of the impacts of capacity mixes on prices gives a finer perspective from which planners need to consider the effects of under. This model adopts a mix of baseload and peaking plants to illustrate effects of bad capacity configurations in a 40 .and over-capacity issues.Figure 3-3: The Australian wholesale market reserve margin and peak prices after liberalization [3] Figure 3-4: The Spanish wholesale market after liberalization [3] In liberalized models where spot markets determine prices of electricity.

and 3-7 summarize the results of the capacity model discussed in [69]. Total Revenue Total Cost Figure 3-5: Optimal mix and level of capacity Total revenue curve is higher than the total cost beyond period T* meaning the base-load generators will operate at super-normal profit Figure 3-6: Right capacity with sub-optimal base-load Surplus capacity forces both the peaking and base load generators into loss hence impossible to recover investment costs Figure 3-7: Excess capacity with optimal base-load 41 . 3-6.competitive market with respect to the demand profile in a region. Figures 3-5.

Figure 3-8: The Australian NEM showing the 5 inter-connected regions [76] The design of the NEM is founded on four main principles [76. Locational pricing. It boasts of the world’s longest interconnected power system with a distance spanning about 5. Spot pricing. reliability. connecting five regions viz: New South Wales.000 kilometres. 77] spanning:     Marginal pricing. and Decentralised decision-making and risk management. and security of the system based on the National Electricity Law and Rules [76]. and Tasmania. Queensland. 42 . Victoria.3. The NEM records electricity transactions of more than $10 billion annually in meeting demands of over eight million users in the Eastern part of Australia. South Australia.4 Case Study: The Australian National Electricity Market (NEM) The Australian NEM began operations in 1998 after restructuring of the previous framework leading to a competitive wholesale electricity market. The Australian Energy Market Operator (AEMO) is charged with operating the NEM as well as coordinating the planning of infrastructure for the efficiency.

9) and promises more within the next decade [79].2. presently at a maximum of $12. The spot prices though dictated by supply and demand balance (also considering system and transmission constraints) are capped. the NEM adopts an approximate form of locational pricing by the use of marginal loss factors (MLF)19 calculated at every node based on the generation to demand ratio at the nodes20.1) The MLFs are computed every financial year by AEMO and reflects the nodal losses with reference to the regional node and the change in nodal demand yearly [77]. as prescribed by the National Electricity Rules (NER). The (marginal) dispatch prices are averaged every half-hour to determine the spot prices for each trading interval upon which generators are paid for their supply in each region.1 of the National Electricity Rules (NER) designed by the Australian Energy Market Commission (AEMC) [83]. and the GreenPower Accreditation Program [78]. By way of considering system reliability and transmission constraints into pricing. 19 The MLF represents the change in network losses across the NEM as a result of small increases in load at connection points compared to hypothetical changes if the loads were located at the regional reference node (RRN). Key policies impacting generation investment in the NEM include the Australian Government’s carbon emission reduction policies. AEMO retains planning and coordination of the market to ensure that its long term efficiency is not jeopardized and also to steer the market in the same direction envisioned by national objectives. 18 These generators are classified as scheduled.Marginal pricing is reflected in the incremental increase/decrease in generation or demand in a spot market where AEMO dispatches generators18 to meet demand at 5-minute intervals. the national renewable energy target (RET) scheme. Policies like these in the last decade have helped ensure a shift in generation investment towards renewable energy technologies (as shown in figure 3. While investment decisions can be seen as decentralized strategic moves by the competing market participants in the NEM. 43 . These locational signals inform market participants about energy variation within the nodal locations hence guiding the operation of existing generation while affording new entrants the opportunity of making more informed decisions regarding loss reduction in the choice of location and technology of plants [77].500/MWh and a minimum of negative $1000/MWh. this serves the overall efficiency of the market in a decentralised decision-making pool of participants. This is represented mathematically as: ⁄ 20 (3. The most recent MLFs computed for the 2011/12 financial year can be found in [84]. semi-scheduled or non-scheduled as discussed in Article 2.

National Transmission Network Development Plan (NTNDP) [80]. and a host other documents prepared for each regions like the South Australian Supply and Demand Outlook (SASDO) [81]. 44 .Figure 3-9: Shift towards renewable energy sources in the last decade [79] AEMO plays a vital role in consolidating the supply adequacy. network planning and future investment opportunities through its suite of planning documents like the Electricity Statement of Opportunities (ESOO) [79]. and it’s expected push on renewable energy investment. With carbon pricing on the verge of coming online in Australia from the next financial year [82]. more rigorous centralized planning is expected to inform not only investors but the public alike on the likely effects of pricing carbon in the NEM.

Here an electricity model21 is developed using available data and some hypothesized data that closely mirror the South Australian wholesale market and would be used to provide answers to questions posed in the objectives section of this thesis. 4. the LT Plan still handles generic constraints common to medium. Policies constraining carbon emissions in the long term here in Australia are well accounted for in the model including effects of a likely carbon pricing commencing in 2012. this is of course in response to the long-term dynamics of the liberalized framework practiced in the NEM. 45 . Deterministic and stochastic simulations are carried out on the model assessing the base case and other scenarios while also treating the sensitivity of model outcomes to buttress conclusions reached. hence dealing with capacity expansion problems.1 PLEXOS LT Plan The LT Plan is one of the unique simulation phases22 offered by the PLEXOS environment with a sole objective of finding optimal combination of generation and transmission builds and retirements over planning horizons (typically 10 .4 MODELLING LONG-TERM INVESTMENT DYNAMICS USING PLEXOS® Electricity markets exhibit some structural patterns and dynamics that are easily captured by mathematical models which aid in testing the likely impacts of policy outcomes in a system. This chapter discusses the PLEXOS LT Plan components which includes variables. endogenous and exogenous variable used in the model are highlighted including assumptions used in gathering exogenous data. and the problem formulation. reserve constraints. etc. 22 Other simulation phases PLEXOS solves are the Projected Assessment of System Adequacy (PASA) or MT schedule and the ST schedules. parameters. PLEXOS LT plan offers a very flexible and rigorous environment for the formulation and optimization of Mixed-Integer Linear Programs (MILP or MIP) that effectively mirror the dynamics in a whole range of market frameworks. Though focused on discounting and end-year effects of expansion decisions. The model is described in detail.30 years). fuel.and short-term decisions like emissions. in this case PLEXOS for Power Systems. Long term planning is not 21 The use of model henceforth in this thesis refers to the representation of a particular power supply/demand system while tool refers to the software architecture.

interfaces) in multi-stages. etc. load.1. as well as modelling mutual exclusivity among projects. fuel prices. The objective function minimizes the net present value of build/retire costs. physical generation and load contracts from participants directly to customers. 4. fixed operations and maintenance costs.0): ∑∑ ( ∑∑ ( ) ) ∑ * ( ∑ ∑ )+ ∑ * ∑( )+ 46 . AC/DC transmission lines. The LT Plan formulation can be represented in a simplified form thus: Minimize (4. A whole range of generating options can be modelled from conventional thermal plants (with or without CCS) to hydro (run-of-river or with storages) down to little details like run up rates and ramp rates (depending on cooling states of generators). In modelling long-term capacity expansion for electricity markets PLEXOS captures a variety of possibilities through its many features including expansion and retirement of infrastructure (such as generators. and the expected production costs following the investment decisions.only carried out in deterministic fashion as the PLEXOS LT Plan can stochastically find the single optimal solution in the face of uncertainties in any input like wind generation.1 PLEXOS LT Plan formulation The LT Plan formulation uses Mixed-integer programming for solving capacity expansion problems using a set of user-defined elements and the necessary problem variables as shown in table 4-1 and 4-2 respectively.

3): ∑ ∑ Integrality (4.5) since the input reserve margin already accounts for forced outages [41].5): 23 ∑ ( ∑ ∑ ) Table 4-1: LT Plan key formulation elements Element Description ⁄( ) Discount rate.4): Capacity Adequacy (4.2): ( ( ) ∑ ∑ ) Feasible Builds/Retirements (4. 47 . We then derive which is the discount factor applied to year .Subject to: Energy Balance (4. and which is the discount factor applied to dispatch period Unit 23 The forced outages and maintenance outages are ignored in the capacity constraint (4.1): ∑ Feasible Energy Dispatch Accounting for Maintenance and Forced Outage Rates (4.

Element Description Duration of dispatch period Overnight build cost of generator Maximum number of units of generator be built by the end of year allowed to Unit Hours $/KW Maximum generating capacity of each unit of generator Number of installed generating units of generator Value of lost load (energy shortage price) Short-run marginal cost of generator which is composed of [Heat Rate] × [Fuel Price] + [VO&M Charge] Fixed operations and maintenance charge of generator Average power demand in dispatch period System peak power demand in year Margin required over maximum power demand in year Penalty for shortage of capacity reserve Penalty for excess in capacity reserve The weighted average cost of capital is a projectspecific discount rate for generator MW $/MWh $/MWh $/KW/year MW MW MW $/MW $/MW % Table 4-2: Some common problem variables used in LT Plan Variable Description Integer number of generating units built in year Generator Integer number of generating units retired in year a collection of generator Dispatch level of generating unit in period for from 48 .

The LT Plan formulation by default does not require reserve margin constraints in (4. although with MIP-compliant solvers such problems are tractable. 49 . or retirement decisions. (4. mothballing. however it also increases the complexity of the problem. and its computation varies across customer types. Given that this research also aims at studying the impact of intertemporal constraints and formulations in long-term planning using chronological modelling of the demand.7): GenTurnOn (t): ( ) ∑ ( ) GenOnk >= GenMUTt for k=t to t+MUT.5) (even though it will be involved in one of the scenarios developed in the model for this thesis) which means that a trade-off between shortage costs24 and the economics of expansion determines whether infrastructure is built or not.Variable Description Unserved energy in dispatch period Capacity shortfall in year Excess capacity in year Constraints (4.8): 24 This could be viewed as the customer’s value of reliability or loss of welfare due to interruption. The integrality constraint in (4.3) define minimum constraints that typically distinguish capacity expansion planning from mid.6): ( ) Minimum Up Time (4. and the resulting reserve margin may/may not meet reliability standards.2). I deem it necessary to highlight some additional formulations in the PLEXOS LT Plan that are otherwise ignored or linearized by the LDC approach. time of interruption as well as other factors discussed in [8].4) makes the problem more realistic in representing the lumpiness of the investments. and all t Minimum Down Time (4. Minimum Stable Level (4.and short-term planning exercises. and (4.1).

1). Another point worth noting in the minimization problems handled by LT Plan is the “lumpy” capital cost. which represents the whole capital cost incurred up to the commissioning date. This is achieved by substituting expression (4.1) into the LT problem given in (4. the PLEXOS LT Plan annualizes the build cost by equivalently spreading the build cost over the economic life of the investment defined by the user. In this simplified formulation.0).9).6 – 4.9. and all t Start Cost and Shutdown Cost (4.9): ( ) ( ) ( ) ( ) Objective (Minimize) (4.0. To cope with this loophole. the capital cost can only be amortized if the economic life of the new builds spans within the planning horizon – which makes it prone to error given that units could be built in the last year of the horizon.9) included in the LT Plan MIP formulation for chronological runs hold true for hourly dispatch periods as is used in this analysis. Integer On/Off decision variable Linear start-up “tracking” variable Linear shutdown “tracking” variable GenOn GenStart GenStop These simple representations of the intertemporal constraints (4. 50 .GenTurnOff (t): ( ) ( ∑ ( )) GenOffk >= GenMDTt for k=t to t+MDT.1): Table 4-3: Description of variables used to define inter-temporal constraints Variable Description This is the maximum output capacity of the unit in period This decision variable represents the number of units operating in each dispatch period. starting from the year of build. In constraint (4.9. the units using additional variables ( ) variable tracks the on/off status of generating and ( ) before start or shutdown costs are applied subject to minimizing the objective function defined in (4.

While utmost attention was given towards replicating the existing system of electricity wholesale supply and demand in SA (which is somewhat reflected in the prices). The model excludes transmission limits and congestion modelling in its optimization of production costs within the SA region however locational losses incurred by all individual generators are represented by the marginal loss factors as defined in [84] for the 2011/2012 financial year.(4. hence referred to as the endogenous variables. Variables placed in the centre of the bull’s eye represent those internally computed or influenced by other such variables.2. This model serves the purpose of benefit maximization for all market participants from a market operator point of view assuming a perfectly competitive framework. The 25 Some of data used were made available through Energy Exemplar’s rich database of information used for consultancy purposes. 51 . The SA region is treated as a stand-alone market but with inter-regional transfers between SA and Victoria modelled as a wholesale market object. Owing to this arrangement electricity is traded between SA and Victoria (within seasonal interconnector transfer limits) in response to correlations between endogenously determined prices in SA and exogenous historical Victorian averages defined as part of the model input. an optimization-based model incorporating all the existing thermal and wind generators in South Australia are modelled.1 Bull’s eye representation of model variables The model developed for this research can be summarized using the bull’s eye diagram given in figure 4-1.0.2 Model Overview For this thesis. Model parameters and Input data and based on industry-wide databases25 and publications (particularly from AEMO) available as at July 2011. limited access to the most up-to-date data and information regarding generating portfolio owned by different participants among others mean that results of modelling carried out are only sufficient for analytical purposes. 4. including data available through previous Energy Exemplar consultancies involving the NEM. The inputs that were needed to closely simulate the behaviour of wholesale electricity transactions in SA are mentioned under the exogenous variables while the ignored parts of the system are shown in the outermost part of the diagram.1) ( [ ( ) ] ) 4.

whereby all generators and the regional load are connected to a node where the pool price is decided. constraints.3 Model Input PLEXOS models the market elements and systems individually or wholly using objects such as generators. and so on with input data defined for their 26 These prices were hypothetically scaled endogenously to fully reflect other scenarios like in the different carbon pricing scenarios.approximated impact of omitting transmission parameters in this model is cushioned in build outcomes based on capacity addition limits of certain generation technologies in different locations. just as the use of MLFs ensures that congestion isn’t entirely ignored in short-term dispatch decisions. regions. The settlement method isn’t affected however. 52 . lines. Figure 4-1: Bull’s eye representation of the SA model 4. The SA region is modelled as an aggregated case. as outputs at generator terminals are balanced against the auxiliary station demands and the marginal losses for the different generators. nodes. Correlating marginal costs of generating in the SA region with hourly prices defined in the Victoria region26 determines if power is purchased (imported) or sold (exported) depending on the seasonal interconnector flow limits defined in the model.

particularly in temporal fashion. Intended for use with a long term planning horizon. Specific times are captured even further with time slices defined to model peculiar outcomes on The complete list of parameters and input data for every generic object used in this model is very extensive hence provided in the Appendix. Summer. emission prices. as well as in combination like in Summer Off-peak for instance. Peak. Data which reflect such dynamism include generator ratings. wind and solar profile. Weekends. the input data are made as dynamic as possible to reflect not only periodic variations but also season fluctuations and yearly trends for up to twenty years. Victorian market prices. and fuel prices. Off-peak. Table 4-4: PLEXOS input objects and properties Property Description Generator Objects Source of data Units Max Capacity Min Stable Level Heat Rate (Thermal efficiency) VO&M Charge Start Cost Rating Number of installed units Maximum generating capacity of each unit Minimum stable generation level AEMO AEMO AEMO Average rate of fuel energy used per MWh electricity generated Energy Exemplar Variable operation and maintenance charge Cost of starting a unit Maximum dispatchable capacity of each unit across different periods Energy Exemplar Energy Exemplar AEMO 53 . build costs. and Winter. Table 4-4 highlights the generic objects used in building this specific model as well as brief definitions of their properties and source of information (where applicable). These properties can be made static if fixed for the whole simulation horizon or dynamic if more flexibility is to be introduced.

ACIL Tasman [85] Marginal Loss Factor FO$M Charge Firm Capacity Forced Outage Rate Maintenance Rate Mean Time to Repair Build Cost MLFs defined for each generator in relation to locational supply/demand profiles Annual fixed operation and maintenance charge Contribution of each generator to capacity reserves A hypothetical probability of failure for each unit AEMO Energy Exemplar Energy Exemplar Energy Exemplar Percentage of time unit is out on maintenance AEMO Average time required to bring a unit back to a dispatchable state Cost of building and commissioning a unit AEMO ACIL Tasman [85] WACC Economic Life Weighted average cost of capital for new projects Period over which fixed costs are recovered for units Hypothetical Hypothetical 54 . Hypothetical Aux Incr Auxiliary energy consumed per unit of generation. Also important for modelling the high auxiliary demands of capturing and storing carbon.Property Max Ramp Up Description Maximum ramp up rate that applies between the Min stable level and the rating Source of data AEMO Run Up Rate Ramp rate that applies while running the unit from zero to Min stable level.

AEMO ACIL Tasman [85] Removal Rate Proportion of emissions captured (used alongside the removal cost to model the extra costs of carbon capture technology) AEMO Removal Cost Incremental cost of emissions abatement Region Objects AEMO Load Load Scalar Load demand for the region Scale factor for input load object AEMO Hypothetical 55 .Property Max Units Built Description Maximum number of units permitted to be constructed in aggregate over the planning horizon reflective of transmission congestion in different zones Source of data AEMO Max Units Retired Maximum number of units permitted to be retired from an existing station over the horizon Fuel Objects AEMO Price Price of Fuel ACIL Tasman [85] Transport charge Additional charge on fuel due to transport requirements Emission Objects AEMO Shadow Price Production Rate Marginal cost of emitting GHG Emissions produced per unit of energy measured per generator or fuel basis. This accounts for both combustion-related and fugitive emissions.

Property DSP Bid Quantity DSP Bid Price VoLL Description Bid quantity for demand-side participation Source of data AEMO Bid price for demand-side participation Value of lost load used to model the spot price ceiling AEMO AEMO Price of Dump Energy Generator Settlement Model Load Settlement Model Load Metering Point Max Maintenance Min Capacity Reserves Node Price of dump energy per MWh used to mirror the spot price floor Determines price paid to generators for electricity supplied AEMO Parameters to mirror NEM Determines price paid by customers Parameters that reflect the NEM Metering point for input loads in the region Parameters that reflect the NEM Maximum generation capacity allowed to be scheduled on maintenance Minimum capacity reserve allowed in the region AEMO AEMO Points of connection of generators and load in the Hypothetical region Line Objects Max Flow Min Flow Maximum flow allowed in the reference direction Maximum flow allowed in the opposite direction AEMO AEMO 56 .

≥. or ≤ sign Penalty Price Price which is paid for violating a constraint. 57 . Ignoring this property for a constraint means it is a hard constraint by default Other input defined in this model include some constraints defined by the Constraint class using fictitious values to effectively model policy directions influencing investments in the NEM like the LRET targets as well as some system reliability states.6) and the other to promote investment in renewable energy based on the revised LRET yearly targets [86] shown in (4. Two key constraints developed for this model include one to ensure a minimum level of inertia is maintained in the system from intermediate and base-load plants given in (4.7).Property Description Market Object Source of data Price Price of imported/exported energy per MWh based on historic prices in Victoria AEMO Price Scalar Price Incr Max Sales Scalar on Market price Increment to dynamic market prices Maximum sales or exports out of the SA region subject to seasonal line limits Hypothetical Hypothetical AEMO Max Purchases Maximum purchases or imports from outside the SA region Constraint Objects AEMO RHS Used to represent a value that binds the constraint Specific to constraint Sense Defines the equality sign for each constraint using =.

solar. and geothermal units) – is the minimum annual total renewable generation contribution in (GWh) required to meet the LRET targets up to year 203027 The generating technologies represented in the model characterize existing scheduled and semi-scheduled technologies and possible new entrant technologies in South Australia at the time of writing. CCGT (with and without CCS). Wind fluctuation is modelled using endogenous stochastic representation of random historic data using locational wind profiles. OCGT. and geothermal plants with information provided for the new entrant technologies in Appendix I. and geothermal units). wind. – is the minimum level of synchronous rotating generation required to maintain system reliability (hypothetically set at 500MW for this study) – is the generation from renewable sources (such as solar units. wind turbines.7): ∑∑ ( ∑ ) Where:       ( ) – is the left-hand side generation coefficient for each of the plants – represent the dispatch from base-load and intermediate thermal units (in this model it comprises coal plants. 27 The values are enumerated in Table 8-7 under appendix II 58 . Biomass. coal-fired plants. biomass or Integrated gasification combined cycle (IGCC). CCGT.6): ∑∑ ( ) ( ∑ ∑ ) Annual minimum contribution of renewable generation based on LRET (4. Thus technologies represented include. Where it is not included it means the constraint cannot be violated as in (4.7).Minimum Inertial Constraint (4. – represents a penalty price for violating that constraint.

Perfect competition is assumed in the spot price formulation based on the true marginal costs of each generator. hence behaviour of generators with regards to forward contracts electricity sales and ancillary obligations are ignored. The effects of some of these scenarios are shown in the sensitivity analysis discussed in a later section. not omitting annual and aggregate build limits on certain technologies due to project exclusivity or locational congestions. This also translates to overlooking permitting delays and construction delays for each technology as a unit is committed the year it is built. In summary. investment decisions are made purely on the basis of expected returns to be accrued from building or retiring each technology in tandem with the exogenous cost curves defined on a technology and locational basis. differing demand-side participation and related economics.5 General Model Hypotheses This model seeks to replicate the economics inherent in an energy-only market as is practiced in the NEM. Hence plants are retired when their net revenues turn negative for an extended period of time within the horizon 59 . Focusing on the South Australian region in the NEM. a limited number of scenarios were developed to demonstrate the sensitivity of this model and tool. carbon price levels. making it a suitable approach for observing the long-term economics of the system as well as an ideal way of carrying out benchmarking exercises for electricity frameworks. regional imports and exports. 4.4 Scenario Analysis PLEXOS tool provides a flexible user interface which ensures parametric study is easily carried out in its models to aid understanding of market dynamics. Technological advancement and learning curves. nevertheless this can be taken into account by specifying dates before which a certain infrastructure is not permitted to come online. While the impact of costing emissions is included in this model under some scenarios. the effects of participant strategies and system-wide policies. no sort of compensation to the generators is included for this study. including their potential use for more practical purposes. The scenarios were constructed to characterize certain changes on capacity expansion in SA including: long-term demand growth patterns using different probabilities of exceedence (POE). the LRET targets.4. capacity obligations of generators and reserve margins. system reliability dynamics represented by constraints.

60 . Priority isn’t given to any projects due to congestion matrices or proximity to transmission and mutual exclusivity of certain projects are equally not considered. 28 Retirement costs can be included in the model although this was ignored for paucity of practical financial data. The ratings for existing thermal plants are assumed to be constant for the first ten years following data drawn from AEMO’s forecast seasonal ratings for the plants in SA. Therefore taxes and depreciation were assumed to be factored into the build costs and annual de-rating of plants for this model. However.and at no extra costs28. Interregional transfers between SA and Victoria are modelled in response to an input price data file dynamically scaled to reflect price increase under the carbon pricing scenarios. Technological learning curves are believed to be adequately incorporated into the model using more efficient heat rates for new entrants (used in one of the scenarios) and in the annual build cost curves defined for every technology. the efficiencies are fixed for the planning span. the thermal plants are assumed to gradually deteriorate in the following decade. The absence of intra-regional transmission network means that losses are only factored in generator settlements using MLFs defined for every financial year by AEMO and this study assumes the same MLFs are maintained for the entire planning horizon. For new units however.

The system is set for benefit maximization of all participants (i. In similar fashion the chronological representation fits 200 blocks into monthly step functions to capture a minimum of daily peak and off-peaks for the entire horizon29 with added intertemporal constraints defined in (4. carbon pricing. This is demonstrated by the use of the relatively less tractable chronological modelling of load demand in capacity planning compared to orthodox methods. Simulation results are used to illustrate the developments thus far in HPC and my arguments biased towards proportionate improvements in decision-making pertaining to investments in electricity markets. Most of the model outcomes have been observed in markets such as the Australian NEM as described at the end of chapter three. bounded by perfect competition) and generators are dispatched in merit orders except where other constraints are binding. and so on. The long-run response of power markets to policy changes is further exhibited showing sensitivity analysis of key variables using some developed scenarios involving reserve margins. 61 .6 – 4. Having been developed to show a simplified model of the South Australian electricity framework.1. simulation results are analysed in terms of the fundamental causes of the simulated results and relative behaviour rather than exact figures reported. 5. Input load demand used for both methods are treated in interval steps of one hour each.e. renewable targets. The transmission network is modelled to a regional level hence all resources are connected to a single notional node while interregional flow algorithms are considered. A system-wide discount rate of 10% is used while project-specific WACC is 29 Random experiments carried out using this model showed that similar results were achieved with as few as 50 blocks per month.5 SIMULATION AND RESULTS In this chapter simulations are carried out on the model presented in the previous chapter baring a few assumptions as discussed. the LDC representation is formed using one block per month with each duration curve sliced into 200 blocks.1.9) of section 4. The system’s initial condition is at an idle state at the beginning of the simulation.1 Simulation Parameters and Conditions Deterministic simulations are carried out over a 20-year planning horizon using LDC and Chronological load representation of the model.

For this case the same model is executed in deterministic mode to minimize overall investment and production costs required to meet the same demand profile over a 20 years horizon within similarly defined reliability level. dispatch economics. The simulation was carried out in PLEXOS 6. However with the peak load defined as a fixed input to the model. the variations in the capacity reserve margin indicate some differences in the order with which capacity is added to ensure reliability. and maintenance outages are modelled in every simulation using Monte Carlo sampling method with the stochastic results fixed to aid accurate comparison of the Chronological and LDC methods. and maintenance outages and the mean of the production costs relative to the different samples is used as a basis for comparisons.2 Base Case Simulations The base case includes all existing scheduled and semi-scheduled generating plants using ratings reported by AEMO as of July 2011 and includes new entrants expected to be commissioned by the end of 2011.defined as input data for different projects. Demand-side participation is included to account for more distributed generation including other uncertainties likely to bear in a carbon-constrained future. Committed and proposed investments beyond 2011 are ignored and subject to economic optimization by the algorithms.202 R11 environment using Xpress-MP solvers. 20 random samples are generated for endogenous variables including wind profile. generator forced outages. 5. generator forced outages. Unit commitment optimization is based on linear relaxation rather than the optimal integer production decisions to reduce the MIP problem formulation. Carbon pricing is defined to come into stream at the beginning of the 2012-13 financial year and retirement of fossil plants is subject to fixed costs. and the chronological method in (b). Results in figure 5-1 show similar behaviours using the LDC method as in (a). This discount rate also applies perpetually after the end of the horizon as the optimization considers on-going existence of the market after the planning horizon ends. 62 . Stochastic samples of endogenous variables like wind profile. Hourly demand forecast is defined for a 10% POE based on AEMO’s high demand growth scenario. reliability levels and other environmental targets defined in the model.

total capacity and reserve margin Close observation reveals less capacity in figure (5-1b) ending at about 8000 MW compared to 9000 MW in (5-1a) despite both reserve margins tailing out at 5% at the end of the planning horizon related to the defined minimum level in the model. and a notional net export capability of the region based on interconnector limits.2) The generation capacity represents the net existing capacity in the region across the 20 years taking into accounts generator builds and retirements as figure 5-2 shows.Figure 5-1: Base model simulations showing the input peak load.1) The capacity reserves takes into account the seasonal ratings of existing and newly installed capacity usually comprising of what is referred to as the firm generation capacity. In summary the capacity reserve can be defined as: ( ) (5. the ‘curtailable’ load representing DSP from wholesale customers like energy-intensive industries in the region. The reserve margin for any given year is calculated thus: ( ) ( ) (5. 63 . the planning peak load – which is basically the peak load but includes other obligational demand that are not considered part of the regional demand.

Another difference observed on a number of results comparing these two simulations have shown that the proportion of wind committed in the latter years of the horizon declines after information on start-ups and other inter-temporal costs is fed back to the problem in the Chronological simulation. does not get such feedback hence opts for a greater share of ‘free wind’ expected to fulfil perpetual demand. The pie charts in (a’) and (b’) show the percentage of new technology commissioned over the horizon. The use of chronological modelling in LT planning carried out here is proving to be very useful in checking excessive wind penetration for a safer and more economic generation portfolio. Wind penetration levels are increasingly being monitored by transmission system operators (TSOs) as the risk of faults and planning for remedial actions are perceived to increase with share of intermittent generation. See that the Chrono method spreads its thermal builds in correlation with the wind builds across the years while the LDC on two different occasions commit huge lumps of intermittent plants in 2022 and 2026 during which the average capacity factor for thermal base-load plants were 40% and 30% respectively. The Chrono on the other hand retires more coal plants (totalling 770 MW) but builds relatively higher share of thermal plants (including intermediate and peak) across the horizon.Figure 5-2: Comparison of capacity builds and retirements between LDC and Chrono executions The LDC solution retires 240 MW of coal plant (base-load) while adding a huge proportion of wind capacity. The LDC however. The last 10 years of the horizon where most of the 64 .

more interestingly using the minimum demand for that year. It is computed by dividing the wind energy penetration by the capacity penetration for each of the Chrono and LDC solutions. 65 .new capacity is added shows more penetration of wind energy in the LDC simulation compared to the Chrono (see figure 5-3). Similarly. Hence the Wind utilization ratio30 indicates that the wind built by the Chrono simulation contributes more towards satisfying local demand than in the LDC. Figure 5-3: Wind penetration levels for Chrono and LDC simulations Europe boasts of some of the highest wind penetration in the world that has been managed successfully with minimal drawbacks to the significant penetrations on 30 The Wind utilization ratio is a notional factor developed for the purpose of this thesis used to show the contribution of wind generation to local demand.e. annual wind capacity penetration (wind/peak demand) from the chronological solution reaches a peak of 51% at the end of the horizon whereas that of the LDC solution yields a higher penetration of about 68% in the final year. The fact that the same demand profile is used for both methods means that the profitability of the excessive investments in wind generation misleads the LDC simulation hence making the builds prone to inter-regional spot prices as most of the wind energy has to be exported or dumped if safe levels are to be dispatched. the maximum possible instant penetration of wind was calculated as 206% for LDC against 155% for the Chrono results. i. Also.

5 6. Ireland and Germany [88].7 (2009) 31 Maximum possible instant penetration (%) 110 111 86 76 155 LDC (2030) 68 50 206 These high penetration levels haven’t been all rosy for the countries involved. More investments in renewables and the resulting greater share of wind generation (wind energy/total generation) in the LDC simulation lead to higher production costs when the build decisions are optimized against short term unit commitment or economic dispatch decisions. The ripple effects of these differing investment portfolios for the models are illustrated by production variables in the following chart in figure 5-4. for example. the Irish SEM was forced to curtail about 1.operational problems. Table 5-1 compares the wind penetration levels from some of these European countries as at year 2010 [88] with penetrations peak levels from simulations carried out. Table 5-1: Successful wind penetration levels attained by 2010 compared with simulation results Capacity penetration (%) Spain Portugal Ireland Germany Chrono (2030) 44 42 32 33 51 Energy Penetration (%) 16 17 10. Portugal.2% of total wind energy (approximately 27 GWh) for security reasons in the latter parts of 2010 [88]. Most notable of these regions of high wind penetration include Denmark. 66 . Spain.

Because the short term decisions can be modeled with greater resolution with chronology retained of course.3 Sensitivity Analysis Having reported similar behaviour using aggregated LDC and intertemporal representation of electricity demand in long-term studies. it is essential to show the sensitivity of this 67 . The Chrono run cuts down its emissions by retiring coal plants and utilizing less of the higher emitting open-cycle peaking plants whereas the LDC forces the capacity factors of the same dirty coal plants below profitable margins hence incurring fixed costs from those plants. although achieved in differing circumstances. we see the overall system costs for the LDC outpacing that of the Chrono as the wind generation share diverges in both methods. there is a higher reliance on peaking plants in order to deal with the relatively high variability of wind generation hence causing more pollution. Also. 5. Simulations showed that investing in the optimum amount of intermittent generation as guided by chronological optimization led to savings in production costs of about 10 percent in the last ten years of the planning horizon.Figure 5-4: Production outcomes incurred from investment decisions The emissions cost (Chrono-Emi and LDC-Emi curve) is seen to account for a significant part of the total production costs forcing noticeable declines in 2017 for both methods.

see that the price average (Market curve) drops and the reserve margin is relatively less spiky as the balance of supply and demand dictates investment in capacity while retaining the minimum reserve level.3. 68 . The relative non-storability of electricity makes the benefits of interregional trade even more appealing. Simulations using 5 blocks per month of LDC are used to show the sensitivity of this model as regards testing the effect of policy decisions and industry regulations by using different parameters here developed in the scenario analysis. To demonstrate the workability of this South Australian Model is not only showing the importance of interchange between regions (as is the case in the NEM and also as designed by the EU Third Energy Package31). 31 Details are as described in the EU Electricity Regulation (EC) No 714/219 of the European Parliament which repeals the Regulation (EC) No 1228/2003 opening up access to cross-border electricity exchanges. but also to show how it could be used for determining interconnector capacities for the most economic gain. towards supporting my arguments. The huge addition in capacity serves to prevent a possibility of unserved energy in the region which in turn could force the average prices to skyrocket even higher. Without market access average prices (No Market curve) are observed to be clearly higher with the reserve margin making a huge climb up to 32% in year 2015 as figure 5-5 shows.1 Impact of market access The importance of accessing neighbouring markets by a region cannot be overemphasized in many regards. With access opened up to the neighbouring Victorian market.decision support tool and the South Australian electricity model built for this research work in particular. 5. not just for competitive prices but also for reliability issues in times of tight supply [65].

Proponents and oppositions of emissions pricing in Australia have not been left out of those debates in recent times with the recent passage of carbon price legislation into law. It is in this light that scenarios were developed to test the impact of the status quo where renewable investment is promoted by policies like the LRET against two other extreme scenarios: a fully-functional carbon pricing mechanism starting with a price of $33. and finally a system totally unconstrained by emission mechanisms where mainly economics is allowed to dictate investments in capacity.2 Emissions pricing and competitiveness of renewable investments In making arguments for or against emission reduction mechanisms in an arguably carbonconstrained era we find ourselves.3. 32 This is increased from the base level of 680 MW of imports and 488 MW of export pending seasonal variations. Prices were reduced even further for the next 10 years. later levelling with that of the base price as its reserve margins drop slightly below that of the base level. the interconnector capacity is increased to a limit of 2000 MW32 for imports and exports from year 2015 and the results shown by the IC Augmentation curves in figure 5-7 as well.28/tCO2-e in 2013/1433.Figure 5-5: Simulations showing sensitivity of price with reserve margins Finally. we are in most cases guided by simulated behaviour of decision support tools and models. 33 See full emissions price trajectory in Appendix II 69 . 5.

However the business-as-usual scenario assumes a ‘do-nothing’ policy. A significant impact of the LRET policy could be seen to encourage early entrance of cleaner technologies without 34 35 See Appendix II Emission factors were omitted for biomass fuels. leaving economic growth and system reliability as major determinants for investment in capacity. Figure 5-6: Capacity builds in the different scenarios The results definitely show some shift towards more environmentally friendly options in the investment portfolios of the different scenarios with investment in wind turbines leading the proportion in all three scenarios. As expected. Obviously with a carbon price in place. shifting towards a less emission-intensive portfolio comes at a cost. 70 . liquid fuel.Using national LRET targets. natural gas. also inter-regional market prices were hypothetically escalated for peak and off-peak periods to reflect the effect of carbon price on the spot prices across the neighbouring region. which explains the steeper cumulative investment curves in the LRET and Carbon pricing scenarios. The carbon scenario was developed based on shadow prices ($/Kg) using AEMO’s NTNDP 2010 [80] figures for a medium pricing trajectory along with emission factors of all the fuels simulated in the model (coal. The sensitivity of this model is further demonstrated by the level of GHG production in the scenarios shown by the shaded areas on figure 5-9. investment in geothermal plants increasingly becomes more viable as fig 5-8(c) shows. this research work assumed that a third of the annual targets34 are to be met by the scheduled and semi-scheduled renewable generation plants from South Australia alone. Figure 5-8 shows the proportions in the capacity added over the horizon for the different scenarios. and biomass35) from the National Greenhouse Accounts (NGA) for 2010 [92] as is laid out in Appendix II. given the inconsistency of the fuel composition and its insignificant share of generation in the South Australian mix.

Another impact of the LRET is in keeping the dispatch spot prices lower compared to prices encountered in the BAU or carbon scenarios. deliberately increasing the share of dispatchable renewable plants means less thermal plants are included in the merit orders determining the price. Although the carbon scenario also brings in more renewable generation. The SRMC is calculated as: ( ) Where the generation. represents the maintenance and direct operational costs of represents an additional charge that may be incurred by generators for rights to deliver power to the grid. hence a rather indifferent effect on emissions production.necessarily hindering the major polluters. the inclusion of emission shadow price in the SRMC of the fossil plants still keeps the prices higher than the LRET scenario. and the ensures that generators are charged marginally for emissions based on pre-defined shadow prices [41]. at least until the level of penetration becomes extremely higher. particularly where the demand growth rate is substantial. Since renewable generation plants such as wind have very negligible marginal costs. Figure 5-7: Scenario analysis of GHG productions under different investment regimes The carbon pricing scenario is shown to curb emissions intensity most effectively in the region as major polluters are forced to account for their emission externalities forcing 71 .

Generally. However. This is due to the relative miserly investment in renewable generation and excessive dependence on thermal plants during the entire horizon. just like in the LRET scenario developed in this model. emissions continue to increase at a steady rate reaching almost 8 times that in the carbon scenario by 2030. etc.) unit commitment behaviour of electricity systems by system operators with the aid of 72 . fastresponse peak OCGTs. Wind turbines. In the BAU scenario however. 5. gives the investment mix shown in figure 5-10.abatement to optimal levels by retrofitting or by even retiring inefficient plants. results from the 3 scenarios discussed (even though aggregated) basically depict possible investment paths for South Australia and mirror closely the actual expected investment portfolio published by AEMO in 2011 [79]. and geothermal plants are expected to dominate investments in generation in the coming years as far as South Australia is concerned. it is difficult to rationalise these projects purely on environmental or techno-economic basis as only a few of the announced projects are committed or even have a set completion date. hourly. Comparing publicly announced projects either under development or at planning stages. and it is in fact still a preferred way of reproducing short term (daily. Figure 5-8: Publicly announced expected capacity additions in South Australia Given the volatility of carbon reduction policies in Australia over the last couple of years.4 Solution Summary: Resource versus Results Chronological representation of load in modelling exercises is not a new phenomenon.

The significantly higher values reported by the Chrono problem size is a reflection of how a simple model increases by complexity as a result of the way extra constraints are handled. and more importantly.53 GHz 32 GB RAM of memory. Having carried out so many simulations. dedicated resources in highperformance computers and significant waiting time have to be accommodated unlike the LDC method which can be done on a personal laptop within reasonable time. Also.modelling or supervisory tools. ramp limits. there is every chance that better modelling techniques like the chronological sort can be applied to realistic models as shown through this research. 73 . Provided computing performance growth continues. minimum on/off periods. and in some cases the only tractable option (depending on the complexity of the model). 24 threads (2 threads/core). Comparing the simulation durations (runtime) of both methods shows why the LDC method is still very much effective given the relatively insignificant time it took to solve. These constraints include: start (and shutdown) costs. that are forced to cycle more when the level of intermittent generation increases in the system. and minimum stable limits of thermal plants. as long as software vendors are able to capture the performance growth through evolution of architectures. the results in table 5-2 gives a good overview of the relative differences between the results of using the LDC method versus the more complex Chrono modelling. The results summarize the performance statistics reported after solving the same model with and without chronology. and 12MB Cache per processor. Experimental simulation runs for this research were carried out using a very high performance hyperthreading enabled Intel machine (for commercially available standards at the time of writing) having the following specifications:    Two Intel Xeon® processors: 12 cores. the amount of memory usage is another indicator that the chronological modelling isn’t perhaps ideal yet. clock speed of 2. length of starts/stops. For this level of detailed optimization to be carried out on a realistic model like that of South Australia used for this research. For planning horizons approaching 5 years and beyond using realistic models however the LDC representation has proven to be very effective.

536 2.925 48 37. This is explained by the fact that most of the 36 The duration of this particular execution is not an ideal reflection of the relative runtimes for similar LDC and Chronological simulations as the RAM is used to full capacity while solving this Chrono problem.801.473.028.4008E+1 1 80.508.26 (100% utilization) 3 times more memory Runtime (hours) Objective Function (NPV) 3.728 855.38 3 Same integer decision size 13 times larger Peak Memory usage (MB) 8.3881E+1 1 23 times longer time to solve 1. Other more tractable versions of the model have shown that similar Chrono problems take 3 – 10 times longer to solve where the memory is within the boundaries of the problem requirement.297.49 31. 37 This difference reflects the total less costs mostly from the production costs over the horizon as the Chrono execution spends more on investment compared to the LDC.386 Chrono 7.541. Very similar values help to validate both methods as being effective however slightly less value reported in the Chrono method is an indication of a better cost-effective expansion plan.5 2.767. the average difference across the simulations accounts for 1% of the LDC value. For this model.1 is a good way to compare the optimization of both methods.1.928 10.Table 5-2: Comparisons of computing demands for LDC and Chrono simulations Base Case Simulation Results Columns (variables) LT Plan Formulation Size Rows (constraints) LDC 1. 74 .78 6 Chrono Factors/differences 5 times more variables 12 times more constraints Integers Non-zero coefficients 48 2.2687E+0937 The objective function as explained in section 4.

savings calculated by the Chrono simulation is being done in the last couple of years when significant amount of wind start to come online. Furthermore, comparing NPVs for both methods taking only the last five years of the horizon (2025-2030) into account reported savings of up to 10% as fig. 5-4 clearly shows. It is important to note at this juncture that other factors like computer system background processes may have competed for resources with the execution demands especially in the Chrono runs where peak memory usage reached 100%. Other factors, including imperfections in solvers arguably better optimised for conventional methods, may have contributed in providing the results shown in the table.

5.5 Improving LT Chronological Execution Times
The realistic and flexible way that the South Australian electricity system was modelled is one way of perhaps showing that retaining chronology in capacity planning may be worth considering especially as intermittency continues to penetrate electricity systems around the world. Scaling computing performances to deal with tractability issues or merely tolerating extra hours might be worth the possibilities of huge savings in capital expenditure and operation costs for future power systems dependent on rigorous and farreaching decisions made today. The major challenge experienced during this research, the extended simulation execution time, is still a big factor in determining what methods are used today. However, projecting ahead through the multi-processing pathway being opened up by chip vendors means that multi-threaded processes harnessed during this research will only get better with time regardless of increasing problem complexity. This means that complex problems will be decomposed and solved concurrently among different cores without losing much in terms of accuracy of solutions. Reproducing investment lumpiness inherent in power systems planning in this model added to integer decisions which ultimately meant the MILP grew in complexity with the number of new entrant options considered. However, one of the ways of simplifying an MILP formulation offered by the tool used was by partially integerizing the planning horizon. This means that expansion decisions could be enforced as integers for a limited time over the simulation period and has the effect of reducing the integers by a fraction of the integerized duration. For instance if a 20-year simulation reports 240 integers, then integerizing only the first 15 years of the horizon reduces the integers in the new formulation to . Arguments for this simplified way of solving CEP 75

problems could be made on the basis that lumpiness (or capacities) of new entrant technologies in later years become more uncertain as the expansion horizon increases, thus linearizing expansion decisions in those years when technological advancement cannot be accounted for should not be viewed as less realistic paths to the optimal solutions. The option of increasing the optimal solution gap for the solver to make choices between feasible solutions also helps in improving execution times. In this case, the optimal solutions reported were very similar despite widening the allowance from 0.01% to 0.1%. With the test carried out both Chrono runs reported exactly the same integer solutions solved by the MIP algorithm but slightly different linear solutions both solved using Interior point algorithm with a gap within 0.1%. Despite the very similar outcomes, this method reduced solution times from 8.5 hours to 5 hours. Also by taking the simulations in smaller multiple steps, e.g. in 5 steps of 4 years each rather than solving a single step of 20 years simplifies the problem formulation. By solving in smaller steps the solver is better able to manage the less number of variables, constraints, and most importantly integers in the formulation, leading to arguably gains proportional to the number of steps. Here, decisions from previous steps are carried over into subsequent steps and the overall solution is reached in the final step. A drawback of this method however is that solving a capacity expansion problem in smaller steps may lead to less optimal overall solutions (usually reporting larger objective functions) as the solutions are optimized sequentially without forward looping other steps. Executing the steps concurrently while allowing feedback from the different steps could possibly be the best way of improving execution times significantly while retaining solution optimality. Whether this can be done efficiently remains to be seen nevertheless.




6.1 Findings and Recommendations
Unit commitment and economic dispatch of electricity systems can be modelled in a chronological manner more accurately. Though used mainly for operational objectives, these outcomes play a huge role in long-term planning (where cost minimization is at stake) as I have shown in this research. Chronological modelling for LT purposes does not only hold advantages in putting a check to high penetration of unpredictable generation options. This work disputes a seemingly popular notion that high penetration of wind plants cuts down GHG pollution proportionately as I have shown using high resolution modelling that it could lead to an over dependence on the less efficient fast-response open cycle turbines. Through this research I also demonstrated that Chronological simulations are better able to capture reliability issues and economic objectives owing mainly to recurring production costs that arise due to the lumpiness of investments, capacity imbalance, and wrong capacity mix. Chronological modelling captures reliability benefits that LDC does not necessarily observe. In the Chrono runs carried out, the level of intermittent capacity added is relatively lesser. Comparing ratios of thermal to intermittent capacity added annually in the planning, Chrono modelling consistently reported significant higher ratios compared to the LDC. This can be attributed to a better representation of the short run marginal costs38 of all other technologies in the electricity system modelled. Overall the Chrono simulation maintained the generation share from intermittent renewable sources below that of the LDC optimization. One of the reasons for this behaviour is to keep the marginal cost of production at a level where the thermal plants are able to compete. More importantly the Chrono method was able to minimize emissions cost from fossil plants despite building less clean renewable plants. Retiring base-load plants when emission costs forces their capacity factor below certain profitability thresholds is considered savvier than incurring fixed cost from those plants while operating at very low capacities as was observed in the LDC optimization.


The Short run marginal costs determine which existing units are placed top of the merit order or which are shut or ramped down [93].


build decisions from the LT simulation phases were decomposed into ST phases for better accounting of production costs. Though inconclusive due to limited computing resources and time constraints. and this model could serve as a pointer to system operators and policy makers seeking impacts of investments in transmission infrastructure. Even if Moore’s law remains valid in the coming years 78 . In addition. Generally the possible accounting of start and shutdown costs in the Chrono method which is reflected in the cost of meeting load through generation gives slightly higher wholesale prices as expected. In this era when investment in renewable technologies are encouraged via a variety of policy paths. In either execution. a comparison of scenario-wise decomposition simulations using 3. retaining chronology in CEP could be vital in risk management and uncertainty analysis if results achieved during this research are anything to go by.Despite less investment in capacity the Chrono method is able to reproduce very similar reserve margins through optimized investment signals fed into the system from more informed unit commitment and dispatch patterns in tandem with the demand trends. An example of its application is in the South Australian Green Grid proposals still being debated [87]. it still serves as a crucial pointer for capacity expansion exercises as information from a chronological base execution may prove indispensable. Whether or not retaining chronology is considered worthy of the waiting times with the current computing options available. The magnitude of the savings made from subsequent production costs were better reflected by short-term (ST) simulations. the LDC approach might not provide a sufficient basis for such information. Meaning that in events where decisions have to reflect worst-case scenarios for instance in CEP. these prices provide better signals for investment purposes as the Chrono simulations consistently save more in production costs following the choice of technology added to the existing system while equally meeting reliability standards. the major learning points of this research so far can only make far-reaching impacts if adopted by all vendors involved in designing the appropriate decision-support tools for future energy systems. project start times. adequate planning for inter-regional trading and opening up of markets can be carried out using the Chrono method at least as a basis. 5 and 7 random wind samples (or scenarios) between LDC and Chrono methods showed significant difference in the objective values – with the Chrono result consistently greater. and perhaps project exclusivity when designing models to be executed using the preferred LDC approach. However. Outcomes from one lengthy execution could be used in determining annual build limits. In summary.

and inter-regional transfer capability are some of the notable tools [93] that can boost the reliability and economic advantages for future systems through improved flexibility for high penetration scenarios of unpredictable generation sources. The chronological simulations could be essential in determining the type or amount of the different tools capable of delivering flexibility to electricity systems characterized by high wind penetration. In very large inter-connected systems like in the US where tractability may hinder the use of the chronological LT method. all sharing a common challenge in computing tractability. as well as ramp rates.2 Prospects for Further Research Work The developed South Australian Model is ideal for testing the impacts of various timedependent variables in chronological fashion against the aggregated Load Duration Curve (LDC) method. hydrogen storages and the much 79 .and supply-side response. Nevertheless. it could still have a huge impact in the roll-out of energy storage and demand-side technologies like electric vehicles. demand. or enjoying the ‘free lunch’ offered by compatibility of old designs on future computer system with negligible gains . and Minimum up and down time constraints of thermal plants. optimum sizes of inter-connectors can be simulated with increase in peak load in the long term. not just for the sake for it but for the benefit of making better “capital-intensive” decisions known to characterise energy systems. Further research could include the impacts of Run up and run down rates of thermal plants to evaluate individual or total influence over the LDC method. 6. In this research work emphasis was placed on the effect of start costs. Energy storage. The South Australian Green Grid arguments for instance could be made clearer with better modelling as the chronological modelling has shown. Review of other literatures in Chapter 2 reiterates the fact that decision support tools are designed around known theories like linear optimization and decomposition methods among others. Depending on the structure of a framework regarding capacity sharing between markets or in contingency cases. This would be very useful for testing the impact of very flexible turbine generators becoming more competitive for high penetration of wind.there’s bound to be trade-offs between rebuilding application architecture for maximizing the throughput offered by the next generation computing systems. and the economic gains expected. this research gives a wake-up call to decision-support tool vendors in the energy industry to re-design their architecture for maximum benefit of the recent evolution of computing technologies.

Overall this research work does not necessarily devalue the importance of the LDC approach in modelling of electricity markets but rather sparks up the momentum for further research into ways of accounting for intertemporal constraints in medium to longterm planning which ultimately means significantly reducing the risks involved with investing in intermittent energy sources. In the area of uncertainty analysis and risk management. including transmission constraints could involve expansion of transmission lines alongside generation options and results could open up new challenges especially where wind profile follows daily patterns (high wind at night and low during the day) or where it is very erratic and unpredictable. Also. In doing so. particularly in ways that will benefit the most from the distributed and parallelized paths computing advancements seems to be headed. Consistent higher objective functions is an indication that with more constraints considered. 80 . this work opens up ideas into finding ways of improving tractability of chronological modelling. The inclusion of transmission constraints means not every generator is able to contribute to immediate demand and hence unit commitment optimization could be very interesting where excessive wind integration in certain zones may force regional prices very high or low during the simulation. A step further may seek the impact of transmission constraints on not only generation expansion but also in total power system expansion including transmission lines and switchgear. the risks associated with different scenarios of generation profile is higher than what traditional energy models would generally specify. accounting for inter-temporal constraints in CEP could provide better source of guidance for quantifying risks and also for defining financing limits. In summary. This study ignores the effect of intra-regional transmission constraints and could swing different ways if included in future studies. this study could be furthered to account for transmission constraints after which generation expansion is evaluated.needed smart meters to improve customer-producer interaction or otherwise demand elasticity. This does not only have importance for centralized planning but also for market players in a competitive market structure.

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1 APPENDIX I – Model Overview and New Entrants Input Figure 8-1: Model visualization showing existing generators and new entrants xi .8 APPENDIX 8.

Table 8-1: New entrants build Costs ($/kW) 2010-2030 [12] Financial Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 Biomass 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 6064 CCGT 1658 1658 1658 1658 1658 1642 1626 1610 1594 1579 1563 1547 1531 1515 1499 1483 1468 1452 1436 1420 CCGT with CCS 2847 2847 2847 2847 2847 2775 2703 2630 2558 2486 2414 2341 2269 2197 2125 2052 1980 1908 1836 1763 Geo (EGS) 8207 8207 8207 8207 8207 8142 8077 8012 7948 7883 7818 7753 7688 7624 7559 7494 7429 7364 7299 7235 Geo (HAS) 8694 8694 8694 8694 8694 8590 8486 8382 8278 8175 8071 7967 7863 7759 7656 7552 7448 7344 7240 7136 OCGT 1195 1195 1195 1195 1195 1186 1177 1168 1159 1150 1141 1132 1123 1114 1105 1096 1087 1078 1069 1060 Solar (PV) 6997 6997 6997 6997 6997 6834 6671 6508 6344 6181 6018 5855 5691 5528 5365 5201 5038 4875 4712 4548 Wind (Large Scale) 3094 3094 3094 3094 3094 3053 3011 2970 2929 2888 2846 2805 2764 2722 2681 2640 2599 2557 2516 2475 Wind (Medium Scale) 3254 3254 3254 3254 3254 3211 3167 3124 3080 3037 2993 2950 2906 2863 2820 2776 2733 2689 2646 2602 Wind (Small Scale) 3583 3583 3583 3583 3583 3535 3488 3440 3392 3345 3297 3249 3201 3154 3106 3058 3010 2963 2915 2867 xii .

03 Maintenance Rate (%) Forced Outage Rate (%) 24.00 0.00 16.41 15.22 7.98 10.00 35.78 8.43 0.20 N/A N/A N/A N/A WACC (%) Economic Life (Years) 30 30 30 30 30 30 30 30 30 30 Max Units Built Biomass CCGT CCGT with CCS Geo (EGS) Geo (HAS) OCGT Solar Wind (Large Scale) Wind (Med Scale) Wind (Small Scale) 11.00 Min Stable Level (MW) 0.99 FO&M Charge ($/kW/year) 40.99 0.00 0.78 8.99 0.78 8.50 125.00 15.00 16.52 3.00 679.52 3.00 37.00 35.01 0.78 8.01 2.13 42.00 N/A N/A N/A N/A Mean Time to Repair (Hrs) 16.00 0.00 1.00 40.99 0.94 3.22 4.78 8.00 50.00 50.00 1.00 187.Table 8-2: Input parameters for new entrant technologies [12] New Entrants Max Capacity (MW) 50.00 0.00 N/A N/A N/A N/A 8.00 5.00 1.78 8.72 0.99 0.00 2.64 4.88 15.89 16.00 280.00 280.99 0.01 0.00 160.00 1.56 3.25 1.78 8.00 Heat Rate (GJ/MWh) VO&M Charge ($/MWh) 2.00 700.00 Aux Incr (%) Marginal Loss Factor 0.06 7.03 0.03 N/A N/A 10.00 9.87 592.99 0.22 3.48 0.50 158.00 0.00 Firm Capacity (MW) 50.78 6 71 71 50 15 313 4000 3000 3000 3000 xiii .78 8.00 700.99 0.17 N/A N/A N/A N/A 7.78 8.00 39.00 42.00 0.96 7.99 0.03 0.00 14.50 42.00 0.00 73.89 16.59 1.00 1.99 0.00 30.64 7.00 25.00 0.00 3.01 0.

990 6.141 9.948 10.320 10.56761 0.324 7.973 7.635 7.8399 4.843 10.677 9.429159 -0.923 6.25751 Financial Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 Biomass 11.342 8.538 11.2739 -0.470 10.153 7.2696 5.575442 0.761 9.748 8.948 10.729 6.583383 0.538 11.8876 8.945 9.857 6.26832 -0.25929 -0.526 10.342 8.6021 10.02576 -0.538 11.571513 0.379 9.538 11.324 7.948 10.324 7.635 OCGT 10.26107 -0.02765 -0.800 7.7453 Transport Charge ($/GJ) 0.587395 0.748 8.375 10.26286 -0.200 7.9112 5.748 8.748 8.356 11.9576 9.342 8.180 11.784 10.27017 -0.227 10.540 8.6364 7.157 8.667 6.809 9.Table 8-4: Hypothetical improvements in heat rates (GJ/MWh) for new entrant thermal plants [12] Table 8-3: New entrant gas prices 2010-2030 [85] Financial Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 Fuel Cost ($/GJ) 4.630 9.9205 7.549 9.606 6.259 9.059 6.6567 8.8914 4.26467 -0.9091 6.5174 6.26649 -0.503 9.948 10.151 10.948 10.324 7.324 7.748 8.800 7.973 7.579399 0.424 CCGT 7.174 10.429 CCGT with CCS 8.895 9.792 6.033 9.682 10.748 8.059 7.084 9.538 11.27578 -0.625 10.486 6.3914 6.009 10.153 8.545 6.200 7.8601 4.27203 -0.1495 8.026 xiv .1439 9.540 8.1363 9.

The cost of Biomass fuels is estimated at 0. The prices reflect among others.The New Entrant gas prices in table 8-3 are forecasted prices for Gas turbines expected to come online during the course of the simulation. xv . expected discovery of new reservoirs and competitiveness of unconventional gas supply in the future.5 ($/GJ) and assumed constant for the planning horizon.

4 60.92 24.85 79.CPT 5 0 0 0 23.93 40.CPT 15 0 0 0 33.5 Medium .33 N/A Table 8-6: CO price trajectory ($/tCO -e) for financial years ending in 2030 [80] Year 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 High .92 51.37 49.69 68.87 26.82 38.3 39.48 32.16 65.8.41 36.91 27.92 83.33 Low .12 86.83 41.88 25.02 51.08 44.42 43.9 93.49 42.41 57.1 30.98 29.05 35.CPT 25 0 0 0 49.63 59.11 69.27 31.8 2 2 xvi .89 76.99 56.23 53.45 89.74 63.28 34.15 58.79 45.28 55.55 47.61 36 37.92 53.11 43.74 34.26 51.2 APPENDIX II – Carbon Pricing and LRET Scenario Input Table 8-5: Fossil fuels and their GHG production rates from combustion [85] Fuels Brown Coal Liquid Fuel Natural Gas Biomass GHG Production Rate (KgC02-e/GJ) 93.32 71.44 38.05 73.94 62.

581 25.781 34.01 in 2013/14 and for subsequent years divided by a notional factor (approximately 933) to get the respective shadow prices used to achieve equivalent amounts of C0 abatement.000 30% Notional SA targets 3466. xvii .Shadow Prices ($/Kg) which proportionately reflected the CO price trajectory sourced from the NTNDP were used as input in the model.381 41.333 5366.33 13666.100 18.667 9927 11460.667 5446 6079.333 8393.67 39 See ‘Definition of Terms’ section for brief explanation of shadow price. 39 2 Table 8-7: Notional LRET targets for South Australia Financial Year 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-30 NEM LRET Target 10.338 18.000 20.181 29.400 16.238 16.667 6000 6860. the shadow prices was kept equal at 2 0. In all scenarios.

010 4.060 3.520 2011-12 3.320 3.90% Table 8-10: Energy projections between 2010 and 2020 [79] MEDIUM GROWTH HIGH GROWTH 14.670 2011 2.512 19.730 4.630 3.790 2.560 2012-13 3.90% Table 8-9: Summer maximum demand projections [79] 2010-11 Medium High Low 3.669 14.860 4.520 3.740 2018-19 3.880 2019 3.060 2.200 2.816 0.970 2.900 2020 3.820 2.610 3.788 17.830 Average annual growth 1.920 Average annual growth 1.239 18. medium and low growth scenarios.520 3.40% 3.720 3.90% 3. and using a base year demand.770 2015 2. Table 8-8:South Australian Winter maximum demand projections [79] 10% POE Winter MD Growth 2010 Medium High Low 2.730 2.080 3.660 2.962 15.980 3.700 2017-18 3.780 2019-20 4.810 2016 2.670 2015-16 3.850 3.20% 0.660 2.630 3.119 18. Maximum demand for each year is applied.530 3. PLEXOS builds the demand profile up to the defined year retaining the pattern of the base year. alongside the energy forecast.3 APPENDIX III – Demand Projection Input Data Publicly available demand patterns from AEMO [79] was meticulously applied in forecasting future demand patterns using PLEXOS.630 2.600 2013-14 3.358 14.470 2.077 15.890 3.850 2018 2.824 15.910 3. AEMO’s ESOO provides Energy projections up to 2021 and the average growth percentage which was used to forecast up to 2040 for this model.670 3.690 2016-17 3.465 14.307 14.700 2012 2.400 2.630 2014-15 3. taking into account the POE as well as summer and winter weather effects.780 4.830 2017 2.200 3.104 15.40% 3.989 18.710 2.020 16.356 19.940 4.300 2.940 3.010 3.022 14.60% xviii .820 2.00% 0. Tables 8-8 through 8-11 show input data used to build demand profile for a 10% POE under high.573 15.850 3.570 2.400 3.730 2013 2.750 2014 2.677 15.880 4.810 3.982 16.8.

45 79.37 70.560 14.2 105.71 75.768 0.65 $1000/MWh 77.88 78.94 87.90% Table 8-12: Demand-side participation (DSP) set at different RRN prices for South Australia [80] High DSP $1000/MWh 77.7 88.18 78.68 $3000/MWh 70.37 70.37 70.73 90.662 14.611 14.22 99.8 88.341 13.3 72.52 93.18 77.54 74.19 79.9 99.95 92.56 80.05 102.54 73.45 79.617 14.4 86.37 70.45 79.62 $5000/MWh 79.1 93.67 82.45 xix .18 79.7 $1000/MWh 77.05 80.9 82.18 77.94 84.18 77.71 77.30% Table 8-11: 2009-10 base year profile [79] Winter MD Summer MD Energy 2460 3.37 72.471 14.47 74.06 Medium DSP $3000/MWh 70.977 1.25 90.45 79.35 85.29 $5000/MWh 79.458 14.95 84.45 79.18 77.15 84.37 70.45 80.16 96.18 77.15 89.18 77.18 77.45 81.45 79.70% 4.28 102.2 79.38 90.75 95.32 85.317 14.58 81.45 79.37 70.35 87.96 84.5 81.37 70.37 70.45 79.620 14.64 76.56 81.18 77.37 71.390 14.45 79.LOW GROWTH 14.37 70.94 82.9 84.30% 1.2 89.66 87.18 Low DSP $3000/MWh 70.18 77.12 79.37 $5000/MWh 79.68 86.

xx .