SOME IMPORTANT ASPECTS OF PRICE BASED

FREQUENCY REGULATION AND PRICING IN

COMPETITIVE ELECTRICITY MARKETS

A thesis
submitted
for the award of degree
of

DOCTOR OF PHILOSOPHY
by
SAURABH CHANANA

DEPARTMENT OF ELECTRICAL ENGINEERING

NATIONAL INSTITUTE OF TECHNOLOGY KURUKSHETRA
KURUKSHETRA, INDIA
APRIL, 2011
2K04-NITK-Ph.D.-1031-E
SOME IMPORTANT ASPECTS OF PRICE BASED
FREQUENCY REGULATION AND PRICING IN
COMPETITIVE ELECTRICITY MARKETS

A thesis
submitted
for the award of degree
of

DOCTOR OF PHILOSOPHY
by
SAURABH CHANANA
Registration No.:2K04-NITK-Ph.D.-1031-E

under the supervision

of

DR. ASHWANI KUMAR

DEPARTMENT OF ELECTRICAL ENGINEERING

NATIONAL INSTITUTE OF TECHNOLOGY KURUKSHETRA
KURUKSHETRA, INDIA
APRIL, 2011
 ii

DECLARATION
I certify that
(a) The work contained in this thesis is my own and has been done by me under the
guidance of my supervisor.
(b) The work has not been submitted to any other institute for any degree or diploma.
(c) I have followed the guidelines provided by the institute in preparing the thesis.
(d) Whenever I have used material (data, theoretical analysis, figures and text) from
other sources, I have given due credits by citing in the text of the thesis with
details in the references.

Saurabh Chanana
Registration No.:2K04-NITK-Ph.D.-1031-E
 iii

CERTIFICATE

Certified that the thesis entitled “Some Important Aspects of Price Based Frequency
Regulation and Pricing in Competitive Electricity Markets”, submitted by Mr.
SAURABH CHANANA is in fulfilment of the requirements for the award of the degree
of DOCTOR OF PHILOSOPHY from NATIONAL INSITUTE OF
TECHNOLOGY KURUKSHETRA. The candidate has worked under my supervision.
The work presented in this thesis has not been submitted for the award of any other
degree/diploma.

Dr. Ashwani Kumar

( Thesis Supervisor)
Associate Professor
Electrical Engineering Department
National Institute of Technology
Kurukshetra, India
 iv

ACKNOWLEDGEMENTS

I am extremely thankful to my thesis supervisor Dr. Ashwani Kumar for his

invaluable guidance and supervision during the course of this work. I sincerely express
my gratitude to him for introducing me to this wonderful area of ‘competitive electricity
markets’.
I am indebted to the authorities of National Institute of Technology Kurukshetra,
especially the Director and the Head of Electrical Engineering Department, for giving me
an opportunity to carry out this work and also for sanctioning a sabbatical leave of one
year during the course of this work. I am highly appreciative of the excellent computing
and library facilities available at our institute for which I would like to thank Professor-in-
Charge of CCN, Librarian and their team.
I take this opportunity to thank all the faculty and staff of Electrical Engineering
Department for their moral support and help. A special thanks to my research colleagues
and friends Dheeraj Joshi, Anil Dahiya, Yashpal, Shelly Vadhera and Jyoti Ohri for
discussing various issues and sharing their experiences with me.
I am also thankful to the anonymous reviewers of my publications. Their
comments and suggestion have been invaluable in shaping this work. I would like to pay
my sincere thanks to all the members of ‘inpowerg’ group and especially to Er. Bhanu
Bhushan and Er. Mark B. Lively. Their in depth discussions on grid operation in India
and ABT Mechanism through this mailing group have been very useful to me. A special
thanks to Jaideep Gupta and Prof. P.J. Philip for their contribution towards proof reading
of research work.
Words are insufficient to express my gratitude towards my parents Late Dr. M. L.
Chanana and Smt. Sudesh Chanana. I just hope to live up to their expectations. My
endless thanks to my wife Renu and daughters Saumya and Ojaswini who have always
inspired me to complete this work in spite of hardships to them. My warm thanks to my
sister Jyotsna, brother-in-law Sh. Rakesh Tuteja and their children Kriti and Vanshika for
their extreme love and support. I would be failing in my duty if do not thank my life
coach Dr. A. S. Chaudhary for leading me to a happy and content life.

SAURABH CHANANA
 v

ABSTRACT
The Unscheduled Interchange (UI) mechanism is primarily a tariff-based mechanism,
which has been proposed for the regulated electricity sector of India. In this thesis, an
effort has been made to propose the model for UI mechanism, which can be used to
analyse its performance in Indian regional electricity grids. Additionally, in this thesis, a
new frequency regulation mechanism based on real-time price linked to frequency has
been proposed. The proposed mechanism deals with all the discrepancies of UI
mechanism and also takes into account the competitive framework of present electricity
markets. This mechanism facilitates the participation of distributed energy resources and
demand side resources in a real-time market, created through this mechanism itself. It
also keeps the grid frequency within specified limits with a little need for maintaining
generation reserves.
A case study on a test system (representing regional electricity grids of India) has
been done to illustrate the benefits of UI mechanism in facilitating real-time trading of
energy and simultaneously regulating the frequency. A case study on a modified IEEE 14
bus system (representing a state grid in India) has been done to illustrate how UI
mechanism promotes economic dispatch in Indian grids. For the proposed frequency
regulation mechanism, based on real-time frequency-linked pricing, a basic relation
between the real-time price and frequency has been derived and linked to the spot-market
price. A steady state analysis of automatic generation control model using price signals is
presented. Taking a test system of four Gencos, the proposed frequency regulation
mechanism is validated by subjecting it to the various types of disturbances under three
probable market conditions viz., normal load, peak load, and off-peak load. The ability of
proposed frequency linked real-time pricing in inducing demand response in real-time
and hence making the demand side to participate in frequency regulation is also
demonstrated. A frequency based thermostat control for residential air-conditioning load
has been proposed to make the loads respond to real-time market signals. Aggregate
models of residential air-conditioning loads have been simulated in a test system to
illustrate the benefits occurring to the system operator and Discos. The control and
operation of a Battery Energy Storage System using proposed frequency linked pricing is
also demonstrated. Simulation has been carried on a test system to show the impact of
increasing wind penetration on frequency and real-time prices taking into account both
 vi

high variability and forecast errors in wind power generation. All test systems have been
simulated in the Matlab/Simulink environment.
The important findings and conclusions drawn from the work done in this thesis
are that the proposed frequency regulation mechanism is decentralized, simple, and
results in economically efficient outcome as real-time price can be known by any
participant simply by sensing the grid frequency. Equipped with knowledge of price in
real-time, market participants can take economic decisions regarding their unscheduled
supply or demand. Although this mechanism does not drive the frequency error to perfect
zero, it has been shown that frequency error is very small for normal load deviations.
Even for large load change or loss of large generators, the system remains stable and
gives adequate economic signal to generators to take appropriate action.
Additionally, a potential role of various FACTS controllers has been explored in
this thesis. Since in the competitive environment, the power system is operated near to its
full capacity, where one or more physical limits of the transmission system can be
violated. Under such maximum loadability conditions, the spot prices of real and reactive
power can have drastic variations leading to market inefficiencies. The impact of three
different categories of FACTS controllers viz., Static Var Compensator (SVC), Thyristor
Controlled Series Capacitor (TCSC), and Thyristor Controlled Phase Angle Regulator
(TCPAR) on spot price variation in competitive electricity market is studied. The Sen
Transformer (ST) is a promising low-cost power flow controller that provides the same
independent active and reactive power flow control as Unified Power Flow Controller
(UPFC), however uses reliable, cost effective, and proven transformer and tap changer-
based technology. Hence, a comparison of two power flow control devices viz., UPFC
and ST has been carried out in terms of their impact on spot price variation in competitive
electricity market under base load and maximum loadability conditions.
A static representation of SVC, TCSC, and TCPAR and a pool type market model
for determination of spot prices of both active and reactive power is presented in this
thesis. A case study on IEEE 14 bus benchmark system has been carried out to study the
variation of spot prices of both active and reactive power using each of these devices
individually, using Mixed Integer Non-Linear Programming (MINLP). Static models of
UPFC and ST are presented along with market models of determination of spot price of
both active and reactive power under conditions of maximum loadability. A case study on
IEEE 14 bus and IEEE 57 bus benchmark system has been done to study the variation of
spot prices of both active and reactive power and maximum loadability after placing
 vii

UPFC and ST using MINLP. GAMS/DICOPT solver has been used for solving the
MINLP problems.
Some of conclusions drawn from the work done in this thesis are that, both active
power and reactive power marginal prices improve with the optimal placement of SVC.
Considerable reduction in reactive power marginal price has been obtained with SVC. As
the number of SVCs is increased to three, the impact on marginal price also increases.
With the optimal placement of TCSC and TCPAR in the system, significant reduction in
active power marginal prices has been observed, however there is no significant change in
reactive power marginal prices. At the maximum loading point of the system, it has been
observed that there is drastic increase in spatial variation of marginal prices of both real
and reactive power and these prices are high as compared to the prices at base case. In the
presence of optimally located UPFC and ST, a reduction in the marginal prices bringing
them very near to the base case values, has been observed and the performance of the ST
has been found to be comparable with that of UPFC.
 viii

Contents
Declaration ii

Certificate iii

Acknowledgements iv

Abstract v

Contents viii

Figures and Tables xii

Abbreviations xvii

Chapter 1 Introduction 1

1.1 General 1
1.2 Deregulation of Electricity Supply Industry 2
1.2.1 New entities in competitive electricity markets 3
1.2.2 Challenge of making competition work in electricity sector 5
1.2.3 Ancillary Services 5
1.2.4 Electricity Market Architecture and Market Types 6
1.3 Real-time Markets 8
1.4 Frequency Regulation in Electrical Power System 10
1.4.1 Primary AGC Loop 11
1.4.2 Secondary AGC Loop 13
1.4.3 Tertiary AGC Loop 13
1.5 Motivation for Thesis 13
1.6 Literature Review 15
1.6.1 Frequency regulation in competitive environment 15
1.6.2 Frequency-linked Real-time Pricing 16
1.6.3 Demand Response 18
1.6.4 Large-Scale Wind Integration and Energy Storage Applications 19
1.6.5 FACTS Applications to Competitive Electricity Markets 21
1.6.6 Spot Pricing of Electricity 22
1.7 Thesis Objectives and Chapter Organisation 23
 ix

Chapter 2 The Indian Power Sector: An Overview and ABT Mechanism 26

2.1 Introduction 26
2.2 Challenges in Indian Power Sector 27
2.3 Institutional Framework of Indian Power System (Pre –reform) 31
2.4 Reforms in Indian Power System 32
2.5 Grid operation in India 35
2.6 The ABT Mechanism 38
2.6.1 Capacity Charge 38
2.6.2 Energy Charge 38
2.6.3 Unscheduled Interchange (UI) Charge 38
2.7 Scheduling and Dispatch under ABT Mechanism 39
2.8 Advantages of ABT Mechanism 41
2.9 Case Study: Economic Dispatch by States under ABT Mechanism 42
2.10 Conclusions 49

Chapter 3 Unscheduled Interchange Mechanism: Modelling and Analysis 50

3.1 Introduction 50
3.2 Trading of Power in India 51
3.2.1 Long Term and Short Term Trading through Open Access 51
3.2.2 Day-Ahead Trading through Power Exchange 52
3.2.3 Real-time Trading through UI Mechanism 53
3.3 Frequency Regulation in India 55
3.3.1 Primary Frequency control 55
3.3.2 Secondary Frequency Control 56
3.4 Price based Generation Control 57
3.5 Case Study: Price based control of IPPs for trading under UI mechanism 59
3.5.1 Indian Test System 59
3.5.2 Price-based Generation Control under UI mechanism 62
3.5.3 UI trading by IPPs 67
3.6 Conclusions 70

Chapter 4 Frequency Linked Pricing in Real-time Markets 71

4.1 Introduction 71
4.2 Price Frequency Relation 72
4.3 Proposed Real-time Market 73
4.4 Price Based Generation Control Model 74
 x

4.5 Case Studies 78

4.5.1 Normal Load Case 80
4.5.2 Peak Load Case 83
4.5.3 Off-peak Load Case 85
4.5.4 Settlement of proposed real-time market 87
4.6 Conclusions 90

Chapter 5 Dynamic Demand Control in Real-time Market 92

5.1 Introduction 92
5.2 Dynamic model of thermostatically controlled air conditioning load 93
5.3 Dynamic Demand Control Model 94
5.4 Dynamic demand control in real-time market 96
5.5 Case Studies 97
5.5.1 Single AC Load 98
5.5.2 Group AC Load 100
5.5.3 DDC in Real-Time Market 101
5.6 Conclusions 106

Chapter 6 Operation and Control of BESS in Real-Time Market with High Wind
Penetration 107

6.1 Introduction 107

6.2 Wind Integration Model 107
6.3 Battery Energy Storage System (BESS) Model 110
6.4 Real-time Market with WPG and BESS 113
6.5 Case Studies 113
6.5.1 Impact of increasing wind penetration 114
6.5.2 Impact of BESS operation 117
6.6 Conclusions 124

Chapter 7 Impact of FACTS Devices on Spot Electricity Prices 125

7.1 Introduction 125

7.2 Market Model for Spot Price Determination 126
7.2.1 Supplier Bid Model 126
7.2.2 Consumer Bid Model 127
7.2.3 Problem Formulation 129
7.3 Static Model Representation of FACTS Devices 131
 xi

7.3.1 Static Var Compensator (SVC) 132

7.3.2 Thyristor Controlled Series Compensator (TCSC) 132
7.3.3 Thyristor Controlled Phase angle Regulator (TCPAR) 133
7.4 Cost of FACTS Devices 134
7.5 Case Studies 135
7.6 Conclusions 140

Chapter 8 Impact of UPFC and ST on Spot Electricity Prices 141

8.1 Introduction 141

8.2 Static Model Representation of Power Flow Controllers 141
8.2.1 Unified Power Flow Controller 141
8.2.2 Sen Transformer 144
8.3 OPF Formulation for Determining Spot Prices under Maximum Loadability 146
8.3.1 Model I 147
8.3.2 Model II 148
8.3.3 Model III 149
8.4 Case Studies 150
8.4.1 Results for IEEE 14 Bus System 150
8.4.2 Results for IEEE 57 Bus System 153
8.5 Conclusions 158

Chapter 9 Conclusion 160

9.1 Main Conclusions 160

9.2 Main contributions of the thesis 164
9.3 Future Scope of Work 165

References 166

Appendix 177

Publications 184
 xii

Figures and Tables

List of Figures
Figure 1.1 A Regulated Utility Structure 2
Figure 1.2 Deregulation of Electricity Supply Industry at (a) Physical Level (b)
commercial Level (c) Operational Level 4
Figure 1.3 Classification of markets on the basis of degree of coordination 7
Figure 1.4 Classification of markets on the basis of time of operation 8
Figure 1.5 Interaction of AGC and Real-time Markets 9
Figure 1.6 Up and Down Regulation Bids in Real-time Markets 10
Figure 1.7 The Conventional AGC Model 11
Figure 2.1 Electricity scenario in India (a) Peak demand deficit (b) Energy shortage 27
Figure 2.2 Comparative per capita electricity consumption of countries 28
Figure 2.3 Growth in per capita electricity consumption in India 28
Figure 2.4 Current fuel mix of India 29
Figure 2.5 Skewed distribution of energy resources in India 29
Figure 2.6 Variation of transmission and distribution losses of India 30
Figure 2.7 Comparison of country wise transmission and distribution losses 31
Figure 2.8 Variation of gap between average cost of supply and average tariff 31
Figure 2.9 Institutional framework of India before reforms 32
Figure 2.10 Timeline of electricity sector reforms in India 33
Figure 2.11 Current institutional framework of electricity sector in India 34
Figure 2.12 Sector-wise ownership of generation capacity 35
Figure 2.13 Regional grids in India 36
Figure 2.14 Hierarchical structure of power grid in India 36
Figure 2.15 Role and functions of various entities in Indian electricity sector 37
Figure 2.16 Variation of UI Charge with grid frequency 39
Figure 2.17 Timeline of scheduling and dispatch process under ABT mechanism 40
Figure 2.18 Modified IEEE 14 bus test system 43
Figure 2.19 Load dispatch at various frequencies 47
Figure 2.20 Variation of system cost with frequency 48
Figure 2.21 Variation of marginal cost with frequency at Bus No. 2 48
Figure 3.1 Various modes of power transactions in India 52
Figure 3.2 UI Rate vs. Frequency as per CERC’s March 2009 Regulation 54
 xiii

Figure 3.3 Operational Guidelines and Threshold Frequency 56

Figure 3.4 (a) Price-based generation control in Region I (b) Price-based generation
control in Region II 58
Figure 3.5 Bid Matching 61
Figure 3.6 Model of Test System 63
Figure 3.7 Response of Frequency and UI Price (Case A) 64
Figure 3.8 Response of Generation and Load (Case A) 65
Figure 3.9 Response of Frequency and UI Price (Case B) 66
Figure 3.10 Response of Generation and Load (Case B) 66
Figure 3.11 Load Change for One Hour Simulation 67
Figure 3.12 Results of One Hour Simulation 68
Figure 4.1 (a) Price vs. Quantity (b) Frequency vs. Quantity 72
Figure 4.2 Price - Frequency Relation 73
Figure 4.3 Price-based AGC Model of an Isolated Area System 75
Figure 4.4 Generation Control Based on Real-Time Prices 75
Figure 4.5 System Supply Cost Curve 79
Figure 4.6 Price-Frequency Curves 79
Figure 4.7 Response to a step load increase of 50 MW (Normal Load) 80
Figure 4.8 Response to a step load decrease of 50 MW (Normal Load) 81
Figure 4.9 Response to loss of 400 MW generation (Normal Load) 82
Figure 4.10 Response to a step load increase of 50 MW (Peak Load) 83
Figure 4.11 Response to loss of 400 MW generation (Peak Load) 85
Figure 4.12 Response to a step load decrease of 50 MW (Off-peak Load) 86
Figure 4.13 Response to loss of 150 MW of load (Off-peak Load) 87
Figure 4.14 Simulation of real-time market for 15 minutes 88
Figure 4.15 Revenue/Payments for 15 min simulation using different times of
integration 90
Figure 5.1 Dynamic model of thermostatically controlled air conditioning load 93
Figure 5.2 Conventional static thermostat control 93
Figure 5.3 Dynamic model of thermostatically controlled air conditioning load using
a smart thermostat 94
Figure 5.4 Frequency based thermostat control 95
Figure 5.5 Price based AGC model of test system incorporating DDC 97
Figure 5.6 Frequency and Tst vs. time 98
 xiv

Figure 5.7 Temperature variation (a) with STC (b) with FBTC 99
Figure 5.8 Demand of a group of air-conditioners 100
Figure 5.9 Load Reduction with and without FBTC 101
Figure 5.10 Change Frequency and Real-time price due to FBTC 103
Figure 6.1 A typical 2 MW wind turbine power curve 109
Figure 6.2 Wind power generation model 110
Figure 6.3 Selling and Buying Marginal Price Curves of BESS 111
Figure 6.4 Price-based Control of BESS with SOC limits imposed 112
Figure 6.5 Price based AGC model of test system including WPG and BESS 113
Figure 6.6 Wind power output plots due to applied wind speed sequence 116
Figure 6.7 Impact of increasing wind power in generation mix 116
Figure 6.8 Impact of BESS operation in Scenario A 119
Figure 6.9 Impact of BESS operation in Scenario B 120
Figure 6.10 Impact of BESS operation in Scenario C 122
Figure 6.11 Impact of BESS operation in Scenario D 123
Figure 7.1 (a) Active power supply bid curve (b) Reactive power supply bid curve 126
Figure 7.2 (a) Active power supply bid curve (b) Reactive power supply bid curve 128
Figure 7.3 Equivalent circuit diagram of TCSC 133
Figure 7.4 Equivalent circuit diagram of TCPAR 133
Figure 7.5 Influence of SVC on APMP 135
Figure 7.6 Influence of SVC on RPMP 136
Figure 7.7 Influence of TCSC on APMP 138
Figure 7.8 Influence of TCSC on RPMP 138
Figure 7.9 Influence of TCPAR on APMP 139
Figure 7.10 Influence of TCPAR on RPMP 139
Figure 8.1 Schematic diagram of the UPFC 142
Figure 8.2 Equivalent circuit of UPFC 143
Figure 8.3 Schematic diagram of the Sen Transformer 145
Figure 8.4 Maximum System Loadability in IEEE 14 Bus Case 151
Figure 8.5 Active Power Marginal Price for IEEE 14 Bus System 152
Figure 8.6 Reactive Power Marginal Price for IEEE 14 Bus System 153
Figure 8.7 Maximum System Loadability in IEEE 57 Bus Case 154
Figure 8.8 Active Power Marginal Price for IEEE 57 Bus System 156
Figure 8.9 Reactive Power Marginal Price for IEEE 57 Bus System 157
 xv

List of Tables

Table 2.1 Generator Data 43

Table 2.2 Bus Data 44
Table 2.3 UI Rate Data 44
Table 2.4 Results of Economic Load Dispatch at Various Frequencies 46
Table 3.1 Deficit/Surplus of States in MW 60
Table 3.2 SEB’s bids in INR/MWh (Day-Ahead Market) 61
Table 3.3 IPP’s bids in INR/MWh (Day-Ahead Market) 61
Table 3.4 Test System Parameters 62
Table 3.5 ISGS’s Parameters 62
Table 3.6 IPP’s Parameters 62
Table 3.7 Frequency and UI Rate for each slot 68
Table 3.8 Payments by SEBs to UI Pool in INR 69
Table 3.9 Revenue Collected by IPPs from UI Pool in INR 69
Table 4.1 Isolated Area Parameters 78
Table 4.2 Genco Parameters 78
Table 4.3 Case Study Data 78
Table 4.4 Parameters of additional Gencos 88
Table 5.1 Energy Consumed by Air-Conditioner 99
Table 5.2 Frequency and real-time price for each time-interval of 5 minutes 103
Table 5.3 UI of each Disco for each time-interval of 5 minutes duration 104
Table 5.4 Payments by each Disco for each time-interval of 5 minutes duration 105
Table 5.5 Savings of Discos due to FBTC 106
Table 6.1 Genco data 114
Table 6.2 Power curve data 114
Table 6.3 Wind speed ramp data 115
Table 6.4 Wind speed gust data 115
Table 6.5 Wind turbulence data 115
Table 6.6 Simulation data for impact of increasing wind penetration 117
Table 6.7 Simulation data of various scenarios for impact of BESS operation 118
Table 7.1 Results for 14 Bus Test System 137
Table 8.1 Comparison of features of UPFC and ST 144
Table 8.2 Coefficients for Active and Reactive bids 150
 xvi

Table 8.3 Optimal Location and Control Parameters for UPFC and ST 151
Table 8.4 Computational Performance on 1.8 GHz Intel Core 2 Duo™ Processor 158
 xvii

Abbreviations

ABT Availability Based Tariff

ACE Area Control Error
AD Area Distribution
AG Area Generation
AGC Automatic Generation Control
AMI Advanced Metering Infrastructure
APMP Active Power Marginal Price
AT Area Transmission
BESS Battery Energy Storage System
CERC Central Electricity Regulatory Commission
CCGT Combined Cycle Gas Turbines
CPP Captive Power Plant
CTU Central Transmission Utility
DDC Dynamic Demand Control
DR Demand Response
ELD Economic Load Dispatch
FACTS Flexible Alternating Current Transmission System
FAPER Frequency Adaptive Power Energy Scheduler
FBTC Frequency Based Thermostat Control
FGMO Free Governor Mode of Operation
IEGC Indian Electricity Grid Code
INR Indian Rupee
IPP Independent Power Producer
ISGS Inter-State Generating Station
ISO Independent System Operator
IRTS Inter-Regional Transmission System
MCP Market Clearing Price
MINLP Mixed Integer Non-Linear Programming
NLDC National Load Dispatch Centre
NLP Non-Linear Programming
OPF Optimal Power Flow
 xviii

PIM Power Injection Model

RG Regional Generator
RPMP Reactive Power Marginal Price
RLDC Regional Load Dispatch Centre
SEB State Electricity Board
SEGC State Electricity Grid Code
SERC State Electricity Regulatory Commission
SGS State Generating Station
SLDC State Load Dispatch Centre
SO System Operator
SOC State of Charge
SRMC Short Run Marginal Cost
ST Sen Transformer
STC Static Thermostat Control
STU State Transmission Utility
SVC Static Var Compensator
TCPAR Thyristor Controlled Phase Angle Regulator
TCSC Thyristor Controlled Series Capacitor
UI Unscheduled Interchange
UPFC Unified Power Flow Controller
VSM Voltage Source Model
WPG Wind Power Generation
Chapter 1 1

Chapter 1

Introduction
1.1 General
The electricity supply industry is now more than a century old and has seen tremendous
changes over these years in the way electricity is generated, transmitted, and distributed.
From the neighbourhood power systems of late 19th century, it has evolved into large
interconnected power system spread over whole nations and regions. Although the
electric power system in different parts of the world differed in their structure, ownership
patterns, and operating procedures, some things were common in them. Most electricity
utilities were monopolies with generation, transmission, and distribution under their
control. These utilities were either government owned, co-operatives, or privately owned
but government regulated. The operation and control of large interconnections of these
utilities was centralized and hierarchical. This model helped to ensure the reliability of
electricity supply and kept the cost of delivery of electricity low. For most of the 20th
Century these power systems remained regulated monopolies with centralized operation
and control.
Economists debated the effects of economic regulation for a long time. However,
such debates remained inconclusive until the deregulation of transportation and financial
services in 1970s and the wholesale market for natural gas in 1980s in Western
economies. Each of the initial experiments with deregulation produced enormous
efficiency gains, accompanied by significant price reduction. In the electricity sector too,
by 1980s, economists started questioning the conventional wisdom and argued that
electricity should be subjected to market discipline rather than being controlled through
monopoly regulation or Government policy. It was argued that the traditional ‘cost of
service regulation’ greatly attenuated regulated firm’s incentives to operate efficiently and
often introduced incentives to operate inefficiently. Simultaneously, with the invention of
Combined Cycle Gas Turbines (CCGT), economies of scale in generation came down
from optimum size of 1000 MW for nuclear plants and 500 to 600 MW for coal fired
stations to 200 MW to 300 MW in case of CCGTs. As a result of these developments,
Chapter 1 2

traditional industry structure and regulatory approach started to break down in the
Western countries. The concept of non-discriminatory open access in transmission under
which transmission owning utilities were required to provide third parties equal access to
their transmission lines, made competition possible. This called for various forms of
structural unbundling of electricity supply industry into generation, transmission,
distribution, and supply.

1.2 Deregulation of Electricity Supply Industry

Many countries in the world have restructured their power industry during last one or two
decades. The traditional industry, dominated by large monopolistic and vertically
integrated utilities, has now given way to a healthy competitive environment in which a
number of generation and distribution companies can trade freely and have a non-
discriminatory access to the transmission network. This change in the structure of power
industry is often termed as deregulation. A basic introduction to deregulated electricity
markets is given in references [1]-[10].The primary objective of bringing these underlying
changes was to treat electricity as a commodity, which can be traded freely and is priced
according to supply and demand conditions existing at a particular time.

Regional Generation
RG1 RG2 IPP1 IPP2

Regional Transmission / Pool Operation / System Operation

AU1 AU2
AG1 AG2

AT1 AT2

AD1 AD2

C C
RG: Regional Generator
IPP: Independent Power Producer
Energy Flow
AU: Area Utility
Commercial Transaction AG: Area Generation
AT: Area Transmission
Operational Service
AD: Area Distribution
C: Consumers

Figure 1.1 A Regulated Utility Structure

Chapter 1 3

The structure a regulated electricity supply industry can be understood from

Figure 1.1. This figure shows a regional grid comprising of several areas. Consumers in
each area are supplied electricity by the Area Utility (AU), which is responsible for
generation, transmission, and distribution in that area. At the regional level, these AUs
pool their resources to improve reliability of supply and reduce cost of electricity. These
regional pools are responsible for coordinating the energy interchange among AUs. Then
there are large Regional Generators (RGs) in which there might be stake of two or more
AUs. These generators may either be utility owned or privately owned, in the latter case,
they are known as Independent Power Producers (IPPs). Regional pools not only facilitate
the commercial transactions but also maintain transmission grid at regional level and
provide system operation services for security and reliability of the regional grid.

1.2.1 New entities in competitive electricity markets

After deregulation, several new entities have been created in the electricity sector. The
erstwhile regulated AUs shown in Figure 1.1 have been unbundled into distinct
generation, transmission, and distribution companies. In this new scenario, a number of
new entities operate in the electricity supply industry. There are a number of power
generation companies called Gencos who compete among themselves to sell their power.
Then there are a number of distribution companies called Discos who purchase power
from the wholesale market and supply it to the local consumers. The entities which own
the transmission network and wheel power from Gencos to Discos are called Transcos.
Figure 1.2 (a) shows the structure of a deregulated electricity supply industry at the
physical level. The power flows from Gencos to Discos via a Transco. Commercial
transactions in the deregulated industry take place through the wholesale power market
which usually comprises of a Power Exchange and a few power trading companies called
Tradecos. Figure 1.2 (b) shows the structure of a deregulated electricity supply industry at
commercial level.
Transmission management and other allied services required for secure and
reliable operation of electric grid are to be provided by an independent agency known as
Independent System Operator (ISO) or simply System Operator (SO). The SO overlooks
the operation of electricity market and is responsible for maintaining reliability and
security standards in the system. Figure 1.2 (c) shows the structure of a deregulated
electricity supply industry at operational level.
Chapter 1 4

G1 G2 Gn GENCOs

TRANSCO

D1 D2 Dn DISCOs

C C C Consumers

Energy Flow

(a)
G1 G2 Gn GENCOs

WHOLESALE MARKET
(POWER EXCHANGE/TRADERS)

D1 D2 Dn DISCOs

C C C Consumers

Commercial Transaction

(b)
G1 G2 Gn GENCOs

TRANSCO ISO WHOLESALE

(ANCILLARY SERVICES) MARKET

D1 D2 Dn DISCOs

Operational Service

(c)
Figure 1.2 Deregulation of Electricity Supply Industry at (a) Physical Level (b)
commercial Level (c) Operational Level
Chapter 1 5

1.2.2 Challenge of making competition work in electricity sector

The transition of electricity industry from regulation to deregulation is not as
straightforward as it appears at first glance. There are several complexities involved in
restructuring and many issues have been raised. According to [4], this is primarily due to
the following peculiar characteristics of electricity industry which creates barriers for its
successful commercialization:
• No Storage (Imbalances): As yet no cost-effective means are available for storage
of electrical energy on large scale. This implies that demand supply balance has to
be maintained at every instant. Therefore, to ensure the security of system, the
imbalance between demand and supply must be corrected promptly by some
technical means.
• Law of Physics (Congestion Management): Flow of electricity through the
transmission lines is governed by physical laws rather than commercial contracts.
Obliging all commercial contracts may cause congestion on certain parts of
transmission network.
• Interdependencies (Ancillary Services): There are interdependencies between the
production of energy and the production of other services necessary to make
transmission system work, such as operating reserves, reactive power, frequency
regulation etc. These services are to be provided by the same generator producing
energy.
• Speed of Light (Scheduling and Dispatch): Electricity travels at the speed of light
over the transmission and distribution lines, hence there is a need to schedule
generation in advance and dispatch it in real time.
These four peculiarities of electricity need to be kept in mind while designing electricity
markets.

1.2.3 Ancillary Services

Ancillary services are defined as all those activities on the interconnected grid that are
necessary to support the transmission of power while maintaining reliable operation and
ensuring required degree of quality and security. Ancillary services would thus include:
• Real power balancing or the frequency control ancillary service
• Reactive power balancing or the voltage control ancillary service
• Transmission security
Chapter 1 6

• Maintaining operating reserves

• Trade enforcement
• Black start capability
As shown in Figure 1.2 (c), the SO is responsible for maintaining the system
reliability and ensuring the security of electric grid and hence procures some of these
ancillary services e.g. operating reserves, frequency control support, voltage control
support etc. from the service providers. The SO also sells or auctions some services like
transmission capacity to the market participants. Therefore, besides the primary energy
market, several other markets like ancillary services markets and transmission capacity
market are operated. One of the key ancillary services traded in ancillary services market
is the real power balancing or frequency regulation. The work done in this thesis is
mainly focussed on provision of frequency regulation service in the deregulated markets.

1.2.4 Electricity Market Architecture and Market Types

The architecture of electricity markets is more complex as compared to the other
commodity markets due to the factors listed in Section 1.2.2. Despite two decades of
operating experience, there is no unanimity among the experts regarding the design and
architecture of electricity markets. Electricity markets emerging in various parts of the
world do not follow any standard design and have wide diversity in their architectures.
The electricity markets are usually composed of several submarkets which are linked to
each other in an intricate manner. These submarkets may be classified on many criteria,
one of them being type of product they are dealing in. On this criterion, the markets may
be classified as:
Energy market: It is the market dealing in the primary energy product. The
market clearing price of electricity is determined in this
market from the bid submitted by buyers and sellers.
Transmission market: In this market, transmission rights are auctioned by the SO.
Transmissions right gives its holder the ability to extract or
inject power into the transmission grid.
Ancillary service market: In this market, ancillary services are procured by the SO
from the ancillary service providers. This market mainly
deals with various categories of reserves.
On the basis of degree of coordination, the submarkets may be classified as
Chapter 1 7

Bilateral: In bilateral markets, sellers and buyer can enter in a

bilateral contract for delivery and receipt of power at a pre-
negotiated price. This may be done directly or through
some broker. The bilateral markets are highly decentralized
and the role of SO is limited only to verifying the
availability of sufficient transmission capacity to execute
the transaction.
Pool: Pool markets, on the other hand are highly centralized with
a greater role for the SO. The SO performs the dispatch
after receiving bids from generators and loads. It
determines the locational marginal price by maximizing the
social welfare function.
There can be several other forms of markets such as brokered, dealer or an exchange as
shown in Figure 1.3 however, bilateral is the most decentralized and pool is the most
centralized form of electricity market.
Highly Highly
Decentralized Centralized

Bilateral Brokered Dealer Exchange Pool

Figure 1.3 Classification of markets on the basis of degree of coordination

On the basis of time of operation, the submarkets may be classified as

Forward Market: This market is dominated by bilateral contracts which may
be either long term or short term. Long term contracts are
fore delivery of electricity for long durations spread over
months or several years. Short term contracts are for
delivery of electricity over a period of few days or weeks.
Spot Market: Spot markets are usually day ahead, for scheduling
resources for each hour of the following day, or hour ahead,
for deviations from day ahead schedule. Both the energy
and ancillary services can be traded in the spot markets.
Chapter 1 8

Real-time Market: To ensure the reliability of power systems, the production

and consumption of electric power must be balanced in
real-time. However the real-time values of load, generation,
and transmission system can differ from the spot market
and forward market schedules, therefore a real-time market
is required to meet the balancing requirement.
The relationship between these markets can be visualized through Figure 1.4.
Day of
One day actual Market
Days, Months or Years ahead ahead Timeline
delivery

Forward Contract Market Spot Real-

Market time
Market

Figure 1.4 Classification of markets on the basis of time of operation

1.3 Real-time Markets

To facilitate an efficient trading in energy and ancillary services a reasonable market
structure is of great importance. In general, the day ahead spot market is for scheduling
the resources at each hour of the following day, and hour ahead spot market is for
adjusting deviations from the day-ahead schedule. The real-time market is for balancing
the production and consumption in real-time. Energy trading is usually done in the spot
markets while ancillary service trading is done in both spot and real-time markets.
For the ancillary services trading done in the spot markets there are two different
approaches: sequential and simultaneous, depending on the amount of control delegated
to the SO.
Sequential approach: This involves sequential computations in the energy and
ancillary service markets in which result of one market
would represent the starting point for the next market. The
SO plays an important role in balancing supply, demand,
and prices in the sequential market structure
Simultaneous approach: This involves the simultaneous of supply demand and
prices in all auction markets. In this approach the SO would
not redispatch the generation in an already closed market to
adjust the second auction market.
Chapter 1 9

In real-time markets maintaining the real-time balance of supply and demand is an

important responsibility of the SO. Automatic Generation Control or AGC is an
indispensable tool in this task. AGC service for minimizing the frequency deviations will
lead to balance of demand and supply and would facilitate bilateral contracts spanning
over several control areas by regulating the tie-line flows.
Participating Resources

Resource Uninstructed
Deviations

AGC Imbalance Auction

Requirement

Resource Instructed
Deviations

Real-time Dispatch Instructions

Figure 1.5 Interaction of AGC and Real-time Markets

The load and supply schedule deviations in real time can be instructed or
uninstructed. Instructed deviations occur because of planned line and unit outages by the
SO and the uninstructed deviations occur because of the load forecasting errors, normal
deviations of load and generation from the scheduled levels, and the unplanned line and
unit outages. The generators and AGC units respond to the uninstructed deviations from
the schedule within few seconds. Then, to return the AGC units to their set points, the SO
will utilize other resources, which have submitted bids for the real-time energy
imbalances, by means of the instructed deviations. The interaction among different
resources in the real-time market is shown in Figure 1.5.
In this scenario the operation of AGC is closely linked with the operation of real-
time balancing markets. The service providers for AGC service submit their bids for up-
regulation as well as down regulation in the real-time market, as shown in Figure 1.6.
Based on the regulation requirement, service providers with minimum bids are selected
and a real-time price for regulation energy is determined. However, in such mechanism
there are several drawbacks. The method of auction in real-time markets becomes
complex due to substitutability of various categories of products [11]. The real-time price
is usually settled ex-post, i.e. the service providers are not aware of the real-time price at
the time of energy delivery.
Chapter 1 10

Price
$/MWh
Up Regulation Bids
Real-time Price

Spot Market Price

-MW Regulation Quantity

Down Regulation Bids

Generation > Load Generation < Load

Figure 1.6 Up and Down Regulation Bids in Real-time Markets

1.4 Frequency Regulation in Electrical Power System

A load change in an interconnected power system causes its frequency to change from its
nominal value. The frequency deviation indicates the mismatch between real power
generation and demand. The Automatic Generation Control (AGC) is provided in the
system to maintain the system frequency at nominal value and the power interchange
between different areas at their scheduled values. The conventional schemes of AGC
have evolved over the past several decades and are in use on interconnected systems. The
conventional frequency control scheme has normally two control loops. First is the
primary control loop, which controls the frequency by self-regulating feature of the
governor, but frequency error cannot be fully eliminated. The secondary control loop has
a controller that can eliminate the frequency error with the help of integral control. In
some systems, there is an additional tertiary control loop, which ensures the economic
dispatch among generators.
Some of the early works in this important area of AGC [12]-[14] were based on
tie-line bias control strategy. The concept of conventional AGC is very well discussed by
Elgerd and Fosha in [15],[16]. They have also described modelling of AGC scheme and
types of the controllers required for the AGC in detail. Jaleeli et al. in [17] have explained
the objectivity of AGC and compared the attributes of AGC strategies from different
Chapter 1 11

aspects. Various strategies of generation control have been compared for a power system
having some units under AGC and others manually controlled.
The conventional AGC model of an isolated area is based on following assumptions:
1. AGC loop maintains control only during the normal changes in load and
frequency. In the emergency situation, when large megawatt imbalances occur,
more drastic emergency controls must be applied.
2. All generators in a control area are strongly coupled and act in unison.
3. Any power imbalance in a control area results in a frequency change assumed to
be uniform through the area.
The three levels of AGC are described below:

1.4.1 Primary AGC Loop

The primary AGC loop makes the initial coarse adjustment of frequency. It acts between
first 2 to 20 seconds (depending on turbine type) of disturbance and changes the turbine
power output in proportion to the frequency change.

Δf
1
R ΔPd

ΔPg Δf
KI ΔPe ΔPgov 1 ΔPv 1 Kp
s 1+sTh 1+sTt 1+sTp
Δf

Governor Hydraulics Turbine-Generator Power System

Primary AGC Loop

Secondary AGC Loop

Figure 1.7 The Conventional AGC Model

The primary loop as shown in Figure 1.7 comprises of governor dynamics,
hydraulic valve actuator transfer function, turbine generator transfer function, and the
dynamics of power system in the control area. The governor dynamics are represented by
(1.1)
1
ΔPgov ( s ) = ΔPe ( s ) − Δf ( s ) (1.1)
R
Chapter 1 12

where ΔPgov is governor output command, ΔPe is the speed changer setting command, Δf
is the frequency change and R is the slope of governor regulation or droop characteristics
of the control area. The action of hydraulic valve actuator is represented by (1.2):
1
ΔPv ( s ) = ΔPgov ( s ) (1.2)
1 + sTh
where ΔPv is valve power output and Th is the hydraulic time constant. The response of
turbine generator is represented by (1.3) for a simple non-reheat-type turbine:
1
ΔPg ( s ) = ΔPv ( s ) (1.3)
1 + sTt
where ΔPg is turbine generator power output and Tt is the turbine time constant. The
power balance equation (1.4) represents the dynamic response of control area power
system.
Kp
Δf ( s ) = ⎡ ΔPg ( s ) − ΔPd ( s ) ⎤⎦ (1.4)
1 + sTp ⎣

1 2H
where K p = , Tp = 0 , ΔPd is the load perturbation, H is the inertia constant in
D f D
MWs and D is a parameter representing frequency dependency of load in MW/Hz.
The static response of primary AGC loop can be calculated by finding the overall
transfer function of the primary frequency control loop. Assuming a constant speed
changer setting, the change in system frequency for a small load perturbation is given by
(1.5)
Gp
Δf ( s ) = ΔPd ( s ) (1.5)
1 + (1/ R ) G p GhGt

Kp 1 1
where Gp = , Gt = and Gh = . For a step load change of constant
1 + sTp 1 + sTt 1 + sTh

magnitude S, change in demand is given by (1.6)

S
ΔPd ( s ) = (1.6)
s
Using final value theorem, steady state frequency error is represents as in (1.7)
Kp S
Δf ss = lim ⎡⎣ sΔf ( s ) ⎤⎦ = − S=− Hz (1.7)
s →o 1+ K / Rp D + 1/ R
Chapter 1 13

1.4.2 Secondary AGC Loop

From the steady state analysis of primary AGC loop it is clear that there will always be a
steady state frequency error due to the action of primary control loop. The secondary
AGC loop takes over the fine adjustment of frequency by resetting the speed changer
through integral control action and bringing the frequency error to zero, as shown by
dashed lines in Figure 1.7. This loop is considerable slower and its response time is of the
order of one minute. The control action of secondary loop is governed by following
relations:
ΔPe = − K I ∫ Δf dt (1.8)

Where KI is the gain of integral controller. Taking Laplace transform of (1.8),

KI
ΔPe ( s ) = − Δf ( s ) (1.9)
s

1.4.3 Tertiary AGC Loop

A tertiary level control loop is required to ensure that all generators in the area share the
load in most economical manner. The optimum operating point of each generator is
usually determined through the Economic Load Dispatch (ELD) program running at the
control centre. This command is usually given manually over telephone, but sometimes
automatically through a control and communication network. Through tertiary loop, the
speed changer settings of generators are adjusted to ensure economic dispatch order
among them.

1.5 Motivation for Thesis

Conventional AGC scheme [18],[19] was developed to maintain frequency near its
nominal value in an interconnected power system. This scheme has done well in a
traditional vertically integrated utility environment. However, the conventional AGC
model is facing challenge of adapting to the techno-commercial changes taking place in
the electricity supply industry. The centralized control of all generation in a control area
is key assumption in conventional AGC model. This no longer holds true for current
deregulated power market scenario. The restructuring of electricity supply industry has
caused the task of frequency regulation to be seen as an ancillary service [20]. This
service has to be arranged either by individual constituents of power market bilaterally or
by the system operator through auctioning [21].
Chapter 1 14

Another challenge for conventional AGC model is the increasing penetration of

renewable energy sources in electricity supply industry due to environmental concern.
The intermittent and unpredictable nature of renewable sources like wind and solar
energy tend to increase the frequency regulation requirement of overall system [22]. In
this scenario, bringing customer owned distributed generation sources [23] and battery
energy storage systems (BESS) [24],[25] into the ambit of frequency regulation market
would be helpful. Even, controlling consumer demand by giving real-time price signals
can ease the stress on AGC system. However, a real-time pricing scheme and an adequate
communication setup is required for communicating real time prices to these entities.
Apart from these issues of common concern, some developing countries have
faced difficulty in maintaining adequate reserves for enabling conventional AGC.
Considering the case of India, where demand growth has far outstripped supply additions,
there are no reserves to ensure system security and reliability. Above this, demand
exceeds generation for most of operating hours during a day [26]. Such a situation may
also develop in other emerging economies where growth in demand is very high.
Managing frequency by conventional AGC model is unthinkable in such cases.
In the year 2002, Indian power engineers introduced a new pricing scheme for
bulk power purchase, known by the name of Availability Based Tariff (ABT) [27]. This
scheme had a frequency dependent price component called Unscheduled Interchange (UI)
Charge. This charge penalized the participants for deviations from hourly schedule. It has
been successful in regulating the frequency of Indian grid over these years. Besides
providing frequency regulation, UI Charge also creates a real-time market. Real-time
decision on injection more/less power than scheduled can be taken by generators based on
prevailing UI Charge. Similarly, loads may withdraw more/less power than scheduled
from grid, considering frequency dependent UI Charge. UI charge has a fixed pre-notified
relation to frequency. This makes it possible for all entities to be aware of UI Charge in
real-time using a simple frequency meter. In this manner, cost of communicating real-
time prices is also avoided [28].
Indian experience has shown that there are clear advantages of linking real-time
price to frequency. This mechanism not only regulates the frequency within stipulated
limits, but also ensures economic dispatch among generation stations. Apart from this, it
offers an opportunity for real-time interchange of energy among various constituents,
without any hassles of prior trading arrangements. Unlike the conventional AGC
schemes, there very few works UI mechanism [29]-[31]. In this thesis, an effort has been
Chapter 1 15

made to propose the model for UI mechanism which can be used to analyse its
performance in Indian regional electricity grids.
Additionally, the UI mechanism is primarily a tariff-based mechanism, which has
been proposed for the regulated electricity sector of India. In this thesis, a new frequency
regulation mechanism based on real-time price linked to frequency has been proposed.
This mechanism takes in to account the restructuring taking place in electricity supply
industry over the years. It facilitates participation of distributed energy resources and
demand side resources in the real-time market created through this mechanism, tapping
the hidden resources within the system. It would be able to keep grid frequency within
specified limits without need for maintaining any reserves.

1.6 Literature Review

A brief review of literature relevant to the issues investigated in this thesis is presented
below:

1.6.1 Frequency regulation in competitive environment

Traditionally vertically integrated utilities have been regulating frequency through
automatic or manual control as a normal part of conducting their business. However, with
the restructuring of electricity sector during last decade, new challenges have appeared in
the area of frequency regulation. Traditional AGC schemes assumes that the control of all
the generation in a control area is centralized, which no longer holds true for today’s
power markets. Therefore, AGC in this new environment has to be visualized with a new
perspective. A brief review of frequency regulation mechanisms proposed for competitive
electricity markets is presented in this section.
Reference [21] proposed two schemes for implementing AGC under deregulated
scenario. Most of the literature on this topic can be classified in two categories based on
these two schemes. One of these schemes is ‘charged AGC’, where the SO must procure
real power from Gencos and resell it to Discos, on a short-term real-time basis. The SO in
this scheme seeks to minimize the cost of purchase of regulation energy by employing
some form of bidding and auction mechanism. Reference [32] describes an ancillary
service market mechanism where regulation energy is procured by the SO. There are
some limitations of ‘charged AGC’ approach. Firstly, the real-time price is calculated ex-
post, hence it can’t give any signal to Gencos and Discos for managing their supply /
demand in real-time. Secondly, the substitutability of regulation energy traded in ancillary
Chapter 1 16

service market with the energy traded in a day ahead market makes it difficult for the SO
to decide the type of auction mechanism to be used. In [33] and [34] authors have worked
on methods based on optimal dispatch to coordinate between ancillary service and day
ahead markets. Thirdly, due to small size of ancillary service market there are concerns
over exercise of market power.
Second scheme is the ‘bilateral AGC’, in which Discos must purchase load-
matching contracts from the Gencos and the SO is not obligated to provide AGC. Authors
in [35],[36] have suggested a framework for AGC in deregulated markets using the
concept of participation factors. The concept of disco participation matrix has been
proposed in [37] for better visualization and implementations of load matching contracts.
The central issue in ‘bilateral AGC’ is that there is no central control algorithm i.e. the
control is highly decentralized. Each load-matching contract requires a separate control
process, yet these control processes must interact cooperatively to maintain the system
frequency. Different approaches have been put forward by authors in [38]-[40] for
implementing such decentralized controls. Several others have worked further to improve
the performance of decentralized control using advanced control techniques like robust
control [41],[42], multi-stage fuzzy PID [43], genetic algorithm [44], robust mixed H2/H∞
[45] etc. European authors in [46] have proposed semi-decentralized solutions like
pluralistic and hierarchical AGC, which are also obligated to maintain the autonomy of
various market zones in Europe. Another challenge for adopting bilateral AGC approach
is the setup of complex and expensive communication system between Gencos and
Discos. This creates a barrier for entry of small and distributed generation resources in the
AGC market. Depending on the market, various approaches have been adopted for
provision of frequency regulation ancillary service. A survey of these approaches can be
found in [47],[48].

1.6.2 Frequency-linked Real-time Pricing

In this thesis, proposal for a frequency regulation mechanism based on real-time
frequency linked pricing has been put forward. A brief review of earlier efforts of some
authors in this are presented here. The conventional frequency regulation, through
governor and AGC action, is based on the philosophy of ‘supply following demand’.
Schweppe et al. [49] have proposed an alternative mechanism, Frequency Adaptive
Power Energy Scheduler (FAPER), which causes demand to follow supply. This
mechanism can adjust the frequency response characteristics of demand to provide
Chapter 1 17

governor and spinning reserve functions. Authors claim that if enough of FAPERs are in
operation, it would be possible to remove existing centralized governor and AGC
dispatch system. They have also proposed a spot pricing mechanism, which reflects the
time varying cost of energy production and delivery. These proposals made almost 30
years back still carry a lot of merit, and ought to be revisited in light of two profound
changes in the industry that have happened since then:
(a) Deregulation of electricity supply industry and establishment of wholesale power
markets in many areas of world.
(b) Wide spread use of Smart Grid technologies e.g. Distribution Automation,
Automated Metering Infrastructure etc.
Berger and Schweppe [50] have proposed a real-time pricing mechanism, where
price varies at a time scale of seconds and has the ability to control the frequency
deviations caused by temporary imbalance between generation and demand. This real-
time price is determined through a proportional plus integral feedback law of frequency
deviations. The control law solves the problem of computing and transmitting prices at a
time scale faster than the dynamics to be controlled. However, authors do not provide any
link between the proposed real-time prices and spot electricity market prices. Another
drawback is the lack of any credible and transparent mechanism through which generators
and loads can sense real-time price through frequency deviations independently.
Zhong and Bhattacharya [51] have proposed a market based framework for
frequency regulation, terming it as automatic balancing service. In this framework, the
balance providers respond to the frequency linked price signals. The SO collects separate
price quantity bids from Gencos for primary and secondary regulation and determines the
market clearing price for these services. However, it is not clear that how SO will be able
to determine the exact regulation requirement for each service ex ante so as to clear the
regulation market. Alvarado et al. [52] have presented an outstanding work on the
stability of market dynamics coupled with the power system dynamics. Authors have not
explicitly mentioned real-time pricing, however hypothesize about a price which reflects
degree of energy imbalance in the system. This price is in fact the real time price. They
have linked a parameter, sensitivity of real-time price to system energy imbalance, to the
stability of system. Authors have concluded that the market only dynamic model is stable
for wide range of this parameter. However, if the dynamics of power system is coupled
with the dynamics of markets, the system is stable in a very narrow range of this
parameter.
Chapter 1 18

Ilic et al. [53] have proposed a power exchange market structure for frequency
regulation. The proposed scheme employs a closed loop frequency control using
competitive markets. Markets ensure the desired control of system frequency by
auctioning out a set of long term contracts, which require the generators to respond to
frequency deviations in a decentralized manner. However, the proposed scheme is subject
to gaming by participants who may misrepresent their load/generation characteristics to
gain undue profits. Additionally, the market clearing depends on the knowledge of
generator’s and load’s droop characteristics, which may not be accurately known. Apart
from this, Ilic et al. have made some important observations in respect of the operation of
frequency control market in large interconnected systems. Authors have concluded that in
open access markets comprising of several control areas, area control error (ACE) should
be replaced by the frequency only criterion. In the open access markets, boundaries
between control areas are no longer relevant, as the power is traded within the
interconnections.

1.6.3 Demand Response

Demand Response (DR) refers to the consumer’s ability to alter its consumption pattern
in response to time varying electricity prices. DR programs give opportunity to
consumers to manage their consumption economically and impact the market price of
electricity. Inclusion of DR in ancillary service market is vital for reducing the cost of
ancillary services like frequency regulation, voltage control, and spinning reserves.
Varieties of DR programs were discussed in [54]. Traditionally, utilities engage only
industrial or bulk consumers for DR programs, but with technological advancement, it is
now very much possible to involve small residential and commercial consumers too.
Advanced Metering Infrastructure (AMI), Home Area Network (HAN), Grid Automation
and Distributed Intelligence are examples of technical innovations that are projected to
help utilities in achieving high degrees of DR. Collectively, these technologies form part
of an initiative called “Smart Grid” [55]. Smart Grids render ability to leverage two-way
communications in real-time with greater control and accuracy, enhancing the DR
capabilities of consumers. However, making the smart grid technologies penetrate at the
level of each residential and commercial consumer will require heavy investment by
Discos. The expansion of smart grid technologies will be governed by a number of
external (economy, oil price, regulatory mandate etc.) and internal (economic and
Chapter 1 19

operational acceptability, integration issues, cyber-security, standardization etc.) factors

[56].
An inexpensive and effective alternative is to control consumer load through
frequency signal. The universal availability of frequency signal makes it an effective tool
for real-time control of devices. The frequency linked real-time pricing has a potential to
produce demand response in real-time. The concept of using frequency to control energy
consuming thermal loads was proposed initially by Schweppe et al. [49]. They introduced
FAPER, a frequency responsive device that can control energy consuming loads e.g.
electric heating, air-conditioning, water heating, industrial met pots etc. The basic
principle of FAPER is rescheduling the use of electricity in which the demand is for
average rather than instantaneous conditions. Some other authors have also promoted the
use of FAPER like devices, which are controlled dynamically using the frequency signal.
Short et al. [57] have simulated the impact of aggregated dynamically controlled
refrigeration load in UK’s electricity market. Their results have shown an increase in
frequency stability of grid both in the times of sudden increase in demand or sudden loss
of generation. When operating with fluctuating wind power, dynamically controlled load
have the potential to smooth the frequency fluctuations considerably. Black and Ilic [23]
have also presented demand based frequency control method that utilizes energy based
loads to provide frequency support in presence of high penetration of distributed
generation sources. All the above mechanisms have proposed frequency based demand
control in real-time, however none of these proposal is backed by a practical and
transparent real-time pricing mechanism. Until an effective market mechanism is
proposed to support dynamic load control, widespread acceptance of such devices will be
limited.

1.6.4 Large-Scale Wind Integration and Energy Storage Applications

In recent times there has been a great concern among people and governments regarding
the environmental impact of emissions coming from fossil fuel based power generation
sources. This has led many countries to set ambitious targets for replacing fossil fuel
based generation by renewable and pollution free generation technologies. On the
forefront of such technologies is wind power generation. Due to intense research in wind
power generation in recent years, the cost of wind turbine generators has come down and
their efficiency has improved considerably. However, integration of wind power into
electric grid at a large scale imposes many technical and economic challenges. Wind
Chapter 1 20

power generation itself is uncertain and intermittent in nature. Its unpredictable nature
makes wind power non-dispatchable from system operations point of view. Intermittency
imposes high ramping requirements on other power plants [22]. Increasing wind power
portfolio imposes extra cost due to increase in additional reserve capacity requirements
and results in inefficient operation of conventional power plants.
Until penetration of wind power was low, there were no major problems in
accommodating wind power generation into grid dispatch on as and when available basis.
However, in most countries with high level of wind power penetration, wind power now
is treated at par with other forms of generations. A number of studies have been carried
out recently in relation to the bidding strategies of wind power plant in day-ahead markets
[58]-[60]. The major target of these strategies is to minimize the imbalance costs imposed
due to uncertainty and intermittency of wind power.
Another innovation directly related to dealing with the challenge of high wind
power penetration is integration of energy storage technologies. A host of energy storage
technologies have been proposed- BESS, Super capacitor, flywheel, compressed air,
SMES etc. to improve the reliability and performance of systems with high wind
penetration. Although most of the studies involving these technologies are conceptual,
only BESS to a certain extent offer a practical solution for wind farms [24]. On one hand
energy storage technologies result in increased profit margins and arbitrage opportunity
for wind farm owners, but on the other hand their high installation cost can make wind
power uncompetitive [25]. The integration of BESS with power network has been studied
widely in relation to load levelling [61], frequency control [62]-[64] and smoothening the
variability of wind farm output [65],[66]. The main concern of these studies was
optimizing the required size of BESS so as to decrease its installation cost.
Recent trend show that the penetration of distributed generation and non-
dispatchable renewable generation sources is increasing day-by-day. The current scheme
of regulating frequency through only generation side control may be insufficient. It would
be necessary for the demand side to participate in the frequency regulation. Apart form
demand control, frequency linked real-time pricing can also alter the role of energy
storage devices like BESS. In recent years, several BESS have been installed word wide
mainly for the purpose of load levelling and peak shaving. The impact of BESS on
frequency regulation was demonstrated for the first time by Kottick et al. [62] using an
isolated Israeli power system. Oudalov et al. [63] have used BESS for primary frequency
control applying it to a large interconnected system (UCTE). The technique developed by
Chapter 1 21

them allowed dimensioning of main parameters of BESS namely, battery capacity,

maximum and minimum state of charge, along with recharge and discharge powers.
Mercier et al. [64] have presented a method for operation of BESS as a spinning reserve
in a small isolated power system.

1.6.5 FACTS Applications to Competitive Electricity Markets

The process of deregulation has caused fundamental changes in the way power
systems are managed and operated. Traditionally power systems were operated in a
manner where system security and reliability were the prime focus. Power systems used
to operate well below their security limits, but with increase in trading activity the same
systems are pushed very near to their security limits. In this situation there is a potential
Flexible AC Transmission Systems (FACTS) technology, which can offer services related
to stability, voltage control, network loading control and enhancement of the available
transmission capacity of existing transmission corridors [67]. In this thesis, two chapters
have been devoted to the potential role of FACTS in deregulated markets, hence a review
of FACTS applications to competitive electricity markets has been presented in this
section.
FACTS as defined by IEEE are “Alternating current transmission systems
incorporating power electronics based and other static controllers to enhance
controllability and increase power transfer capability”. The impact of FACTS devices on
transmission pricing [68],[69], congestion management [70],[71], system security [72],
[73], total transfer capability [74] and transmission rights auction [75] in a deregulated
environment has been studied to a certain extent. In most of these papers sensitivity based
approach is used for placement of FACTS controllers in the system. A review of literature
on application of FACTS devices in deregulated electric power systems is given in [76].
Installation of these controllers with their optimal location can improve power
flow, stability, security, reliability, and economic efficiency of the system. Various
approaches have been reported in the literature considering the impact of optimally
located controllers like Static Var Compensator (SVC), Thyristor Controlled Phase Angle
Regulator (TCPAR), Thyristor Controlled Series Capacitor (TCSC), and Unified Power
Flow Controller (UPFC) on the spot price variation of real and reactive power with the
different objectives [77]-[79]. Recently, “Sen” Transformer (ST) as a new member of
family power flow controllers has been introduced which have the main components as
voltage regulator transformer and phase angle regulator with wide range of capability of
Chapter 1 22

controlling real and reactive power flow through the transmission line [80]. In the
reference [81], the performance of “Sen” transformer has been compared with UPFC. The
new power flow controller has similar capability to control power flow as UPFC, but
since the cost of the “Sen” transformer is comparable to that of phase angle regulator, the
device can provide more economic solutions in the new environment of power system
operation.

1.6.6 Spot Pricing of Electricity

In the price based competitive emerging electricity markets, the transparent pricing
structure of electricity for both active and reactive power has emerged as one of the major
challenge and issue. Along with the real power transmission pricing, with the growing
interest in determining the costs of ancillary services needed to maintain the quality of
supply, the spot price for reactive power has also gained great importance. From the
economic point of view, spot pricing based on short run marginal cost (SRMC) has the
potential to provide the economic signals for the system operation. Spot prices have been
used as a criterion for placement of FACTS devices in this thesis. An overview, of
models proposed by various authors for determination of spot prices is presented in this
section.
Various models and approaches for determining spot pricing have been proposed
in [82]-[84]. Schweppe et al. [82] utilized the concepts of classical economic dispatch and
DC load flow to obtain the essential parts of spot price and provided the foundation and
starting point for later research. However, the authors have not considered the pricing of
reactive power. A tool named WRATES, for evaluating the marginal cost of wheeling
was described in [85]. The network flows and losses were considered either using
modified DC load flow approximations or an exogenously provided sensitivity matrix
obtained from the AC power flow. The spot price model was further developed by
demonstrating the physical meanings and numerical properties of the generation and
transmission components [86]. Ray and Alvarado [87] used the first trial of OPF as a spot
price calculation tool and utilized modified OPF model with price responsiveness of real
power demand to analyse the spot pricing policies.
Baughman and Siddiqi [88] developed this model introducing reactive power
pricing and revealed that the Lagrangian multipliers corresponding to node power balance
equations in OPF represent the marginal costs of the node power injections. The account
of the reactive power production cost by introducing MVAR cost curves was given in
Chapter 1 23

[89]. Reference [90] developed a reactive power pricing scheme through employing P-Q
decoupled OPF to obtain SRMC of active and reactive power respectively. Determination
of wheeling marginal cost of reactive power was proposed in [91].
Growing interest in the determination of cost of ancillary services, spinning
reserve, congestion alleviation cost, and security, led to decomposition of the spot price to
obtain the different pricing components in it. Various authors [92]-[100] have addressed
the problem of spinning reserve pricing, congestion alleviation cost, and security
components of spot price. Issues related with recovery of capital cost of capacitors,
opportunity cost of generators and procurement and charging of reactive and voltage
control services were addressed by various authors in [101]-[108].
Recently new formulations [109] have been considered for calculating the cost of
reactive power production with a modified OPF that uses sequential linear programming
technique with a modified interior point method. Rosehart et al. [110] addressed the
incorporation of voltage stability into an optimal power flow formulation with an
objective to price voltage security in electricity markets. Reference [111] has presented an
OPF based dispatch and pricing model to optimally allocate real and dynamic reactive
reserve among the generators to maintain pre-specified voltage stability margin.

1.7 Thesis Objectives and Chapter Organisation

In view of all issues discussed previously and review of relevant literature,
following are the main objectives of present work:
• To study and analyse the performance of UI mechanism in Indian grids in terms of
promoting economic dispatch, real-time trading and frequency regulation.
• To propose a frequency regulation mechanism based on frequency linked pricing
for competitive electricity markets.
• To study and analyse the performance of proposed mechanism in terms of
frequency regulation and ease of settlement.
• To investigate the application of frequency linked real-time pricing for dynamic
demand control, enabling the demand side to participate in frequency regulation.
• To investigate the application of frequency linked real-time pricing for markets
with high penetration of wind power and operation and control of BESS in such
real-time markets.
Following objectives have also been pursued in the present work:
Chapter 1 24

• To study the impact of various types of FACTS controllers on fluctuations in the

spot price of active and reactive power in pool type electricity market.
• To compare the performance of two power flow control devices, UPFC and ST in
terms of impact on spot price of active and reactive power in pool type electricity
market.
The thesis has been organized in nine chapters. The present chapter introduces the
competitive electricity markets and real-time pricing of electricity. It presents a review of
relevant literature and sets the motivation behind the research work carried out in this
thesis.
Chapter 2 presents an overview of Indian electricity sector. It explains the
institutional framework of electricity supply sector in India and also discusses the
operational challenges facing the sector. An outline of reform process initiated by the
Government of India is also presented. The ABT mechanism, a reform measure,
introduced to streamline the operation of Indian power grids is presented in detail. The
multiple advantages of this mechanism for Indian electricity sector scenario are discussed.
A case study on a modified IEEE 14 bus system (representing a state grid in India) is
done to illustrate how ABT promotes economic dispatch in Indian Grids.
Chapter 3 presents the various trading opportunities in Indian electricity sector
and the frequency regulation mechanism adopted in Indian grids. In this chapter, dynamic
models of UI mechanism, a part of ABT mechanism dealing with frequency-linked
tariffs, has been developed. A case study on a test system (representing regional
electricity grids of India) has been done to illustrate the benefits of UI mechanism in
facilitating real-time trading of energy and simultaneously regulating the frequency.
In Chapter 4, a new frequency regulation mechanism based on real-time frequency
linked pricing is proposed for competitive electricity markets. A basic relation between
the real-time price and frequency is derived and linked to the spot-market price. A steady
state analysis of automatic generation control model using price signals is presented.
Taking a test system of four Gencos, the proposed frequency regulation mechanism is
validated by subjecting it to the various types of disturbances under three probable market
conditions viz., normal load, peak load and off-peak load. An appropriate method for
financial settlement of the proposed real-time market is also presented.
Chapter 5 demonstrates the ability of proposed frequency linked real-time pricing
in inducing demand response in real-time and hence making the demand side to
Chapter 1 25

participate in frequency regulation. A frequency based thermostat control for residential

air-conditioning load has been proposed to make the loads respond to real-time market
signals. Aggregate models of residential air-conditioning loads are simulated in test
system to illustrate the benefits occurring to system operators and discos.
Chapter 6 demonstrates the control and operation of a BESS using proposed
frequency linked real-time pricing. A model of BESS with separate charge and discharge
process and fixed SOC limits is presented. Simulation have been carried on a test system
to show the impact of increasing wind penetration on frequency and real-time prices
taking into account both high variability and forecast errors in wind power generation.
In Chapter 7, the impact of three different categories of FACTS controllers on
spot price variation in competitive electricity market is studied. A static representation of
SVC, TCSC and TCPAR and a pool type market model for determination of spot prices
of both active and reactive power is also presented in this chapter. A case study on IEEE
14 bus benchmark system has been done to study the variation of spot prices of both
active and reactive power using each of these devices individually using mixed integer
non linear programming.
In Chapter 8, a comparison of two power flow control devices viz., UPFC and ST
has been done in terms of their impact on spot price variation in competitive electricity
market under base load and maximum loadability conditions. Static models of UPFC and
ST are presented along with market models of determination of spot price of both active
and reactive power under conditions of maximum loadability. A case study on IEEE 14
bus and IEEE 57 bus benchmark system has been done to study the variation of spot
prices of both active and reactive power and maximum loadability after placing UPFC
and ST using MINLP.
Chapter 9 presents the main conclusions and contributions of this thesis and also
suggest the scope of future research on these issues.
Chapter 2 26

Chapter 2

The Indian Power Sector: An Overview

and ABT Mechanism
2.1 Introduction
India is emerging as one of the fastest growing economies in the world. A major priority
of Government of India (GoI) is to provide adequate electricity supply to fuel high growth
rate of economy. Although the power generation capacity of India has steadily increased
over last few decades, but demand growth has far outstripped supply growth. This has led
to a continued energy shortage over the years. Even at present, the energy shortage and
peak demand shortage is estimated to be 10.6 and 12.1 per cent respectively [112]. The
power deficit situation in the country has been further aggravated by problems like fuel
supply bottlenecks, high transmission and distribution losses, and poor financial health of
public utilities [113], [114]. Several reforms were initiated by the GoI, to boost generation
capacity and reinforce the existing transmission and distribution infrastructure. The
reform process is still ongoing and yet to produce the desirable results [115]. However the
Electricity Act 2003 [116] has given a major boost to trading activities and encouraged
competition in the Indian electricity sector. Another problem, which could have hindered
the growth of electricity sector in India, was the operation of its synchronized regional
grids. Before 2002, these grids were extremely volatile and there were wide and rapid
frequency fluctuations resulting in frequent blackouts [26]. In 2003, Availability Based
Tariff (ABT) was introduced to deal with grid operation problems. This scheme not only
streamlined the operation of regional grids but also encouraged economic and competitive
behaviour in the regional grid constituents [27], [28].
In this chapter, the institutional framework of Indian electricity sector has been
presented. The reform measures and their influence on this framework have also been
presented. The grid operation and scheduling process is explained. The ABT mechanism
and its all benefits to the Indian electricity sector are discussed. In the end, a case study is
presented to show the impact of ABT on economic dispatch within the states.
Chapter 2 27

2.2 Challenges in Indian Power Sector

As on 31st March 2010, the total electricity generation capacity of India was around 157
GW. Despite the fact that installed generation capacity of India has increased from 1362
MW at the time of its independence (1947) to 156784 MW in 2010, severe capacity
shortages continue to plague this sector. The demand has continuously exceeded supply
and these shortages are likely to stay in near future as shown in Figure 2.1 (a) and (b). In
the year 2009-2010, national peak demand was 119 GW and only 104 GW was met, a
shortfall of 12.7%. The shortage with respect to the energy requirement over the same
period was 10.1%.

140000 16.6 20
Demand (in MW)

120000 13.9 13.8

12.4 13 11.8 12.2 11.9 12.7 15
100000 11.3 11.2 11.7 12.3

percent
80000
10
60000
40000 5
20000
0 0
1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-
98 99 00 01 02 03 04 05 06 07 08 09 10

Year

Peak Demand Peak Met Deficit

(a)

900000 11.1 12
9.8 10.1
800000 9.6
8.8 8.4 10
700000 8.1 7.8
Energy (in MU)

7.5 7.1 7.3

600000 6.2 8
5.9
percent

500000
6
400000
300000 4
200000
2
100000
0 0
1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009-
98 99 00 01 02 03 04 05 06 07 08 09 10

Year

Energy Requirement Energy Available Shortage

(b)
Figure 2.1 Electricity scenario in India (a) Peak demand deficit (b) Energy shortage
Chapter 2 28

The per capita electricity consumption of India in the year 2006 was around 631
kWh and was far less in comparison to any of the developed countries, as shown in
Figure 2.2. It was one-fourth of even the average electricity consumption of world.
However the future estimated growth rate of electricity consumption is 6.75 %.
Therefore, the per capita electricity consumption is likely to increase to around 1000 kWh
by 2012 as shown in Figure 2.3. Officially, 84% of villages in India have been electrified.
However, only 55% household have access to electricity. At the start of eleventh plan
period (2007-2012), more than half of India’s population lack access to electricity or any
other form of commercial energy. Meeting the energy access challenge and ensuring
lifetime supply of clean energy to all is essential for empowering individuals.

Per Capita Electricity Consumption (kWh)

USA 13078
7818
World 2456
2185
Brazil 1883
1801
Thailand 1752
1379
India 631

0 2000 4000 6000 8000 10000 12000 14000

Figure 2.2 Comparative per capita electricity consumption of countries

Per Capita Consumption of Electricity in India

1200
1000
1000

800
631
in kWh

600
408
400
238
200 130.5
83.5
15.6 34.8
0
1950 1960 1970 1980 1990 2001 2006 2012

Figure 2.3 Growth in per capita electricity consumption in India

Chapter 2 29

India’s electricity generation is dominated by thermal power (coal, gas and oil, for
a combined share of 65%), followed by 24% share of hydroelectric power and 3% of
nuclear power. Total grid interactive generation capacity from renewable energy sources
is about 8%. The overall fuel mix of India is shown in Figure 2.4.

Fuel Mix of India

Cogeneration-Bagasse
0.85% Solar
Biomass 0.01%
Small Hydro 0.54%
Others
1.67%
0.04%
Wind
7.25%

Large Hydro
22.54%
Coal
53.12%

Nuclear
2.75%
Oil
0.72%
Gas
10.49%
Source: CEA (as on 31/3/2010)

Figure 2.4 Current fuel mix of India

Figure 2.5 Skewed distribution of energy resources in India

Chapter 2 30

India is not endowed with large primary reserves in keeping with her vast
geographical area, growing population, and increasing final energy needs. The
distribution of primary commercial energy resources in the country is skewed. Whereas
coal is abundant and is mostly concentrated in the eastern region, which account for
nearly 70% of India’s coal reserves. Similarly, more than 70% of India’s hydro potential
is located in its northern and north eastern region, as shown in Figure 2.5. Thus an
interstate and interregional transmission system of adequate capacity needs to be built to
transmit power efficiently from one region to another. The present interregional
transmission capacity is 17000 MW and is expected to be 37000 MW by 2012.
Another concern is the transmission and distribution loss, which continue to be
amongst the highest in the world. The reported all-India average transmission and
distribution loss increased from 19.8% in 1992-1993 to 33.98% in 2002-03. Since then, it
has marginally declined to around 27%, as shown in Figure 2.6, owing to the rising
awareness and targeted efforts in this area. Still these losses are far more than other
countries like Japan, USA and China where transmission and distribution losses are less
than 8%, as shown in Figure 2.7. Moreover, the tariffs for certain consumer categories are
subsidized. This has made state utilities financially sick and unable to invest adequately in
additional generation capacity. For the same reason private investors have only limited
interest in setting up power plants that would sell electricity to these utilities. The gap
between average cost of supply and average tariff increased from 50 paise/ kWh in 1996-
1997 to 115 paise per kWh in 2001-2002. Thereafter this gap has decreased over the years
due to some conscious efforts by the Government, as shown in Figure 2.8. However, the
gap is still wide enough and its further decrease is limited by the socio-political factors as
discussed in [118].

Transmission and Distribution Losses in India

40

35
33.8
32.5
31.3
30 29.55
28.15
25
in %

20

15

10

0
2002 2004 2005 2006 2007

Figure 2.6 Variation of transmission and distribution losses of India

Chapter 2 31

Country-wise T&D Losses

Albania

Nigeria

India

Pakistan

Sri Lanka

Brazil

UK

Australia

China

USA

Japan

0 10 20 30 40 50 60
in %

Figure 2.7 Comparison of country wise transmission and distribution losses

Gap between Average Cost of Supply and Average Tariff

140

120
115.58

100
88.09
in paise/kWh

80 78.76 81.8 82.17

60

40

20

0
2001-02 2002-03 2003-04 2004-05 2005-06

Figure 2.8 Variation of gap between average cost of supply and average tariff

2.3 Institutional Framework of Indian Power System (Pre –reform)

The ownership of generation and transmission facilities in India is based on the federal
structure of the country. Constitution of India has placed power development in the
concurrent list. Hence, both central and state governments have powers to make laws and
regulations on various issues. At the time of independence, the institutional framework of
electricity sector in India was governed by Indian Electricity (IE) Act, 1910 and
Electricity Supply (ES) Act, 1948. Power development in each state was entrusted upon
Chapter 2 32

State Electricity Boards (SEBs). These SEBs were the state-owned vertically integrated
utilities with generation, transmission and distribution under their control. In some urban
areas there were privately owned utilities, also called private licensees, which were also
vertically integrated.

Private
SEBs ISGSs Licensees Generation

SEBs CTU Private Licensees Transmission

SEBs Private Licensees Distribution

Dom- Indus- Agri- Comm-

estic trial cultural ercial Consumers

Power Flow

Figure 2.9 Institutional framework of India before reforms

In order to fulfil the growing energy needs of states, many central sector
generation utilities were formed for generation development in thermal, hydro and
nuclear sectors. This power development was carried on regional basis during 1960s and
1970s. Each state in a region was allocated share in these central generation stations, also
known by the name of Inter-State Generating Stations (ISGS). A Central Transmission
Utility (CTU), known by the name of Power Grid Corporation of India Limited (PGCIL),
was formed in the year 1989 to evacuate power from central stations to the state grids.
These developments led to the parallel operation of state grids with each other, thus
forming a synchronous regional grid. The overall institutional structure of Indian
electricity sector before the initiation of reforms is shown in Figure 2.9.

2.4 Reforms in Indian Power System

Several initiatives have been taken by Government of India during the last two decades to
boost generation capacity. In view of the poor financial state of SEBs, GoI decided to
amend the IE Act, 1910 and ES Act, 1948, in order to attract private investment in power
Chapter 2 33

generation. However, the reform efforts focussed solely on generation sector and did not
yielded the desired results, as discussed in [115].
Hence, efforts were initiated for functional unbundling and privatisation of SEBs
into distinct generation, transmission and distribution companies; and formation of State
Electricity Regulatory Commissions (SERCs). The main role of SERCs include licensing
for undertaking business in its jurisdiction and setting of tariff for transmission and
distribution business. The presence of regulatory framework was deemed necessary for an
industry characterized by natural monopoly. Hence, Electricity Regulatory Commissions
(ERC) Act was enacted in 1998, which provided for setting up of Central Electricity
Regulatory commission (CERC) and state regulatory commissions. The main function of
CERC included regulating the tariff of ISGS and IPPs catering to more than one state. It
was also responsible for setting the tariff for inter-state transmission of electricity. Apart
from these two responsibilities, CERC has taken two significant steps viz. introduction of
ABT and Indian Electricity Grid Code (IEGC), which have been instrumental in
streamlining the operation of regional grids.
Recognising a need for further reforms and to introduce competition and
efficiency in Indian power sector, a comprehensive Electricity Bill was drafted in the year
2000. After a lot of public debate and amendments, this bill got enacted in 2003 as ‘The
Electricity Act 2003’ [116], replacing the three existing legislations governing power
sector namely, IE Act 1910, ES Act 1948, and ERC Act 1998. This Act envisages de-
licensing of generation, unbundling of vertically integrated public utilities, introducing
open access, launching a day-ahead energy exchange, and allowing private participation
in transmission and distribution sector.

1991 1998 2001 2003 2004 2008

Amendment of IE Act, 1910

Introduction of Availability
and ES Act, 1948 to attract

Open Access Regulations

commissions (CERC and
Acts to set up regulatory

Setting up of Power
Electricity Act 2003
Based Tariff

Exchanges
SERCCs)
IPPs

Figure 2.10 Timeline of electricity sector reforms in India

Chapter 2 34

Figure 2.10 shows the timeline of various reform measures that have taken place
in the Indian electricity sector in last two decades. No mention of timeframe for
implementations of recommendations of Electricity Act 2003 [117] and several social-
political compulsions [118] have hindered the progress of these reforms. Especially, the
functions under jurisdiction of states have been showing resistance to reform measures.
Due to this, several states have not yet unbundled their SEBs and intra-state ABT
implementation is also pending in several states.

Private
SGSs ISGSs Licensees
IPPs CPPs Generation

STUs CTU Private Licensees New Trans. Lic. Transmission

Power Trading Co.s Power Exchange

DISCOMs Private Licensees

Distribution

Dom- Indus- Agri- Comm-

estic trial cultural ercial
Consumers

Power Flow

Contracts

Figure 2.11 Current institutional framework of electricity sector in India

However, CERC took some important measures to encourage competition and
bring efficiency in this ailing electricity industry. The Open Access in Inter-state
Transmission Regulations issued by CERC in 2004 [119] have paved way for any Genco,
SEB/Disco or private licensee to have non-discriminatory open access to the transmission
network of central and state transmission utilities on payment of transmission access
charge. This has led to rapid increase in bilateral trading and emergence of several trading
companies. After some time, need for a common platform for electricity trading was felt.
In the year 2008, CERC came up with guidelines for setting up power exchange and since
then two power exchanges have been established. The Open Access in Interstate
Chapter 2 35

Transmission Regulations 2008 [120] was issued by CERC to accommodate collective

transactions taking place in the power exchanges. These regulations were further
amended in the year 2009 [121]. The current framework of Indian electricity is shown in
Figure 2.11.
Due to the reform measures taken over last two decades, much of the capacity
additions happening now are in the central sector generating stations and privately owned
generating stations. The current break-up of generation ownership among Centre, State
and Private sector is shown in Figure 2.12. The combined share of Central sector and
private generation has increased from 25% in 1991 to 50% now and is likely to be 75%
by 2020.

90 82.5
80
1979
2006
70 2010
60 55
50
Per Cent

50

40 34 32
30
18
20 12 11
10 5.5

0
States Centre Private

Figure 2.12 Sector-wise ownership of generation capacity

2.5 Grid operation in India

The Indian power system operates with five regional grids: Northern Regional
(NR) Grid, Western Regional (WR) Grid, Southern Regional (SR) Grid, Eastern Regional
(ER) Grid, and North-Eastern Regional (NER) Grid. Each of these regional grids
incorporates five to eight state grids, as shown in Figure 2.13. The structure of
transmission network in India is organized in a hierarchical manner, as shown in Figure
2.14. At the bottom of this hierarchy are the state grids comprising mainly of transmission
lines below 400 KV. The State Generating Stations (SGSs), small IPPs, and Captive
Power Plants (CPPs) within a state are connected to the state grids. All state grids within
a region are connected to the regional grids comprising mainly of transmission lines of
400 KV and above. All ISGS and big IPPs within a region are connected to the regional
grid. Up to the year 2002, each region operated as a separate a.c. system, with a few
Chapter 2 36

interregional links of back-to-back HVDC for controlled exchange of power between

different regions. At present, four regional grids NR, WR, ER and NER operate
synchronously connected to each other by means of an inter-regional transmission system
(IRTS), also called the NEW grid. Only SR region connects to rest of the grid via
asynchronous back-to-back HVDC links. All interregional lines and HVDC links form
the national grid which is at the top of hierarchy depicted in Figure 2.14.
National Grid

Northern Region Western Region Southern Region Eastern Region North-Eastern

(NR) Grid (WR) Grid (SR) Grid (ER) Grid Region (NER) Grid

Delhi Goa Andhra Pradesh Bihar Assam

Haryana Daman Diu Karnataka Jharkhand Arunachal Pradesh

Himachal Pradesh Gujarat Kerela West Bengal Meghalaya

Jammu Kashmir Madhya Pradesh Tamil Nadu Orissa Tripura

Punjab Chhatisgarh Pondicherry Sikkim Manipur

Rajasthan Maharashtra Nagaland

Uttar Pradesh Dadra Nagar Haveli Mizoram

Uttaranchal

Figure 2.13 Regional grids in India

NATIONAL
GRID

ISGS IPP

REGIONAL REGIONAL REGIONAL

GRID GRID GRID

CPP
SGS IPP

STATE GRID STATE GRID STATE GRID

SEB / DISCOM

Figure 2.14 Hierarchical structure of power grid in India

Chapter 2 37

Scheduling and Regulator Transmission Grid Code

Dispatch Operator

National
Level NLDC
CERC CTU IEGC
Regional
Level RLDC

State
Level SLDC SERC STU SEGC

Figure 2.15 Role and functions of various entities in Indian electricity sector

Regional Load Dispatch Centres (RLDCs) in each of the five regions are
responsible for grid operation at regional level. State Load Dispatch Centres (SLDCs) are
responsible for grid operation at state level. The legal framework for regulation of inter-
state power transfer is vested with Central Electricity Regulatory Commission (CERC)
and the regulation of intra-state power is vested with concerned State Electricity
Regulatory Commission (SERC). The Indian Electricity Grid Code (IEGC), issued by
CERC, defines the role and responsibilities of various utilities, the scheduling and
dispatch code, operational requirements and responsibilities in real-time operation, the
planning code, and other allied issues at national and regional levels. Similar issues at the
state level are handled by state grid codes issued by respective SERCs. Figure 2.15
illustrates the role played by various entities in Indian power sector at national, regional,
and state level.
The increase in trading activities has led to increase in flow of power over the
ISTS and IRTS. The present inter regional transmission capacity is 17000 MW and is
expected to be 37000 MW by 2012. The grid operator Power Grid Corporation of India
Ltd. (PGCIL) has found the operation of regional grids in India to be very challenging.
Before 2002, grid operators in India faced a major problem in the form of grid
indiscipline. A glaring symptom of which was wide and rapid fluctuations in grid
frequency from below 48.0 Hz to above 52.0 Hz on daily basis. Abnormally low
frequency during peak load hours was caused by inadequacy of generating capacity and
attempts to meet consumer loads by SEBs in excess of available generation. High
frequency during off-peak hours was the result of generation stations not backing down
Chapter 2 38

adequately when the consumer demand came down. The root cause of this problem was
the then prevailing tariff structure for bulk power supply. The power from ISGSs was
being supplied to SEBs as per simplistic single part tariff, which disregarded the
consumption pattern, deviation from schedule, system condition etc. To deal with the
problems faced by grid operators, a new tariff scheme: Availability Based Tariff (ABT),
was introduced in July 2002.

2.6 The ABT Mechanism

ABT is a three-part tariff scheme. First part is the fixed component linked to the
availability of generating stations, second part is the variable component linked to the
energy charges for scheduled interchange, and third part is a frequency dependent
component linked to the unscheduled interchanges. In the given generation shortage
scenario of Indian system, the third component of ABT – the UI charge acts as a
mechanism for regulating the grid frequency. At the same time, this mechanism offers an
opportunity to the participants to exchange as and when available surplus energy at a
price determined by prevailing frequency conditions. The three components of ABT are
explained below.

2.6.1 Capacity Charge

This component represents the fixed cost and is linked to the availability of the
plant, i.e., its capability to deliver MWs on a day-by-day basis. The total amount payable
to the generating company over a year towards the fixed cost would depend on the
average availability of the plant over the year. In case, the average actually achieved over
the year is higher than the specified norm for plant availability, the generating company
would get a higher payment. In case the average availability achieved is lower, the
payment will be lower, hence the name Availability Based Tariff.

2.6.2 Energy Charge

This component of ABT comprises of the variable cost, i.e. the fuel cost of the
power plant for generating energy as per given schedule for the day. Therefore, this
energy charge is not according to the actual generation but only for scheduled generation.

2.6.3 Unscheduled Interchange (UI) Charge

In case there are deviations from schedule, the third component of ABT comes
into picture. Deviations from schedule are determined in 15-minute time blocks through
Chapter 2 39

special metering and priced according to the system condition prevailing at that time. If
the frequency is above 50 Hz (nominal frequency in Indian System), UI rate will be
small, and if it is below 50 Hz, it will be high. As long as the actual generation / load is
according to the given schedule, the third component of ABT is zero.

Figure 2.16 Variation of UI Charge with grid frequency

The relationship between the UI Charge and grid frequency is inverse, as shown in Figure
2.16. This relationship is notified by CERC and is reviewed periodically. The curve
shown in Figure 2.16 was notified in the year 2004.

2.7 Scheduling and Dispatch under ABT Mechanism

The ISGSs in different regions of the country have various States of the region as their
specified beneficiaries or bulk consumers. The latter have shares in these plants
calculated according to a formula, and duly notified by the GoI. The beneficiaries have to
pay the capacity charge for these plants in proportion to their share in the respective
plants. This payment is dependent on the declared output capability of the plant for the
day and the beneficiary’s percentage share in that plant, and not on power / energy
intended to be drawn or actually drawn by the beneficiary from the ISGS.
The energy charge to be paid by a beneficiary to an ISGS for a particular day
would be the fuel cost for the energy scheduled to be supplied from the power plant to the
beneficiary during the day. In addition, if a beneficiary draws more power from the
regional grid than what is totally scheduled to be supplied to it from the various ISGSs at
a particular time, it has to pay for the excess drawal at a rate dependent on the system
Chapter 2 40

conditions, the rate being lower if the frequency is high, and being higher if the frequency
is low.
The scheduling and dispatch process under ABT starts with the ISGSs in the
region declaring their expected output capability for the next day to the RLDC. The
RLDC breaks up and tabulates these output capability declarations as per the
beneficiaries' plant-wise shares and conveys their entitlements to the SLDCs. The latter
then carry out an exercise to see how best they can meet the load of their consumers over
the day, from their own generating stations, along with their entitlement in the ISGSs.
They also take into account the irrigation release requirements and load curtailment etc.
that they propose in their respective areas. The SLDCs then convey to the RLDC their
schedule of power drawal from the ISGSs (limited to their entitlement for the day). The
RLDC aggregates these requisitions and determines the dispatch schedules for the ISGSs
and the drawal schedules for the beneficiaries duly incorporating any bilateral agreements
and adjusting for transmission losses. These schedules are then issued by the RLDC to all
concerned and become the operational as well as commercial datum. However, in case of
contingencies, the ISGSs can prospectively revise the output capability declaration,
beneficiaries can prospectively revise requisitions, and the schedules are correspondingly
revised by RLDC. The timeline of complete scheduling and dispatch process under ABT
mechanism is shown in Figure 2.17.
Time

D-1 day

Availability Declaration
0800 hrs
Entitlements
1000 hrs
Requisition &
Bilateral Agreements
1500 hrs I R S
S Injection Schedule
L Drawal Schedule L
1800 hrs G D D
S Revision in DC C Revision in Requisition C
2200 hrs

Final Injection Schedule FinalDrawal Schedule

D- day
Revisions during Revisions during
0000 to
Current day Current day
2400
hours

Figure 2.17 Timeline of scheduling and dispatch process under ABT mechanism
Chapter 2 41

While the schedules so finalized become the operational datum, and the regional
constituents are expected to regulate their generation and consumer load in a way that the
actual generation and drawls generally follow these schedules, deviations are allowed as
long as they do not endanger the system security. The schedules are also used for
determination of the amounts payable as energy charges, as described earlier. Deviations
from schedules are determined in 15-minute time blocks through special metering, and
these deviations are priced depending on frequency. The metered energy is then
compared with the scheduled energy for that 15-minute time block, and the difference (+
or -) becomes the UI energy. The corresponding UI rate is determined by taking the
average frequency for the same 15-minute time block into account. Also, for each ISGS
and State, the actual energy has to be metered on a net basis, i.e., algebraic sum of energy
metered on all its peripheral interconnection points, for every 15-minute time block. All
UI payments are made into and from a regional UI pool account, operated by the
concerned RLDC.

2.8 Advantages of ABT Mechanism

Beside promoting competition, efficiency, and economy and leading to more
economically viable power scenario, ABT has been able to pave way for high quality
power with more reliability and availability through enhanced grid discipline. The
mechanism has dramatically streamlined the operation of regional grids in India. Through
the system and procedure in place, schedule of constituents is determined as per their
shares in ISGS, and they clearly know the implications of deviating from these schedules.
Any constituent which help others by under-drawal from the regional grid in a deficit
situation, gets compensated at a good price for the quantum of energy under-drawn. Some
of the merits of ABT mechanism are listed below:
• By giving incentives for enhancing the output capability of power plants, it
enables more consumer load to be met during peak hours.
• By separating fixed charges based on availability from variable charges backing
down during off peak hours no longer results in financial loss of generating
stations. Therefore, earlier incentive for not backing down and raising system
frequency during off-peak hours no longer exists.
• By charging separately for unscheduled interchanges the problem of over drawl
during peak load condition, resulting in lowering of frequency has been
Chapter 2 42

controlled. UI rate is high during the low frequency condition which discourages
the over drawl of power.
• Because of clear separation between fixed and variable charges, generation
according to merit-order is encouraged and pithead stations do not have to back
down normally. The overall generation cost accordingly comes down.
Apart from these intended benefits, the ABT mechanism has provided a vast scope of
unscheduled interchange of ‘as and when’ available energy in the grid. It also establishes
a mechanism for harnessing captive generation, co-generation, and bilateral trading
between the constituents.

2.9 Case Study: Economic Dispatch by States under ABT Mechanism

In this case study, an analysis is carried out on the effect of ABT mechanism on the
economic decisions taken by a state. The economic decisions regarding scheduling and
dispatch in every state are taken by the respective SLDCs, as discussed in Section 2.7.
After receiving the availability of its share in all ISGSs and availability of its own SGSs,
the SLDCs decide the schedule of drawal from the regional grid, in order to meet the load
requirement for the next day in best possible manner. Under normal circumstances, all
states are expected to adhere to this schedule. However under ABT mechanism, the states
are free to under-draw or over-draw power from the regional grid, and the rate of
unscheduled energy interchanged with the regional grid depends on the prevailing system
conditions, as explained in Section 2.6.3. The decision of states to deviate from regional
grid drawal schedule is a strategic decision and influences the overall cost of generation
in the state. In order to be able to make efficient decision regarding strategic re-dispatch
of power the states must employ the Economic Load Dispatch [18] (ELD). The ELD
problem for a state consists of minimizing the cost of its own generation sources and cost
of energy imported from regional grids.
A modified IEEE 14 Bus system is used to illustrate that how states can minimize
their cost by strategically re-dispatching / rescheduling their load under the given
frequency conditions. For this purpose, the conventional formulation of ELD has to be
modified to take into account the frequency dependent component of ABT. The analysis
is carried under static conditions and frequency has been considered as an external input
to the system assuming that re-dispatch of load in the area under consideration will have
little impact on the grid frequency.
Chapter 2 43

GRID
2
1 3

G2

G1
4 7 G4
5 8

9
6 11 10
14

12
G3
13

Figure 2.18 Modified IEEE 14 bus test system

The modified IEEE 14 Bus system, as shown in Figure 2.18, is taken to represent a state
grid in this case study. The generator and bus data for this system are given in Table 2.1
and Table 2.2 respectively. There are total four generators in the state, which compete
with the regional grid to meet the total load of 399MW in a given 15 minute slot. It is
assumed that the system is connected to the regional grid via Bus 2, therefore the grid
interconnection is replaced by a generator of very high rating at Bus 2.

Table 2.1 Generator Data

c b a Pgmin (MW) Pgmax (MW)
(in $/MWh2) (in $/MWh) (in $)
G1 0.01 10 100 10 200
G2 0.02 25 100 5 60
G3 0.02 20 100 5 50
G4 0.03 35 100 5 60
Chapter 2 44

Table 2.2 Bus Data

Bus No. Pd (MW) Qd (MVar)
1 0 0
2 21.7 12.7
3 94.2 19
4 47.8 23.9
5 57.6 21.8
6 11.2 7.5
7 25 10
8 25 10
9 29.5 16.6
10 29 15.8
11 23.5 11.8
12 6.1 1.6
13 13.5 5.8
14 14.9 5.6

Table 2.3 UI Rate Data

Frequency UI Rate
(Hz) ($/MWh)
48.5 35.00
49.0 35.00
49.5 23.65
50.0 11.83
50.5 0
51.0 0

This case study illustrates that states can use ELD as a tool to reduce their overall costs
and even earn UI Charges in some cases. The objective function of ELD problem in this
case study is given by (2.1), which is minimization of the sum of generation cost of
state’s own generation stations (Cg) and cost of its drawal from regional grid (Cgr). The
constraint equations of the ELD problem are the generational load balance equation given
by (2.2) and generator output limits for all generating stations given by (2.3). Here, Pgi is
Chapter 2 45

the output of ith generator in MW and Pgr is the drawal from regional grid in MW. PD is
the overall system demand, PL is the net transmission loss in the grid, Pgimax and Pgimin are
the maximum and minimum limits on the output of ith generator, all in MWs.
min Cgr ( Pgr ) + ∑ Cgi ( Pgi ) (2.1)
i

subject to
Pgr + ∑ Pgi − PL − PD = 0 (2.2)

Pgimin ≤ Pgi ≤ Pgimax (2.3)

The costs functions of state’s generating stations are given by (2.4), where a, b and c are
the cost coefficients.
C gi ( Pgi ) = ai + bi Pgi + ci Pgi2 (2.4)

The drawal from the regional grid is composed of two components, the scheduled
interchange (PgrSI) and the unscheduled interchange (PgrUI), as indicated by (2.5).
Pgr = PgrSI + PgrUI (2.5)

Hence, the cost of drawal from the regional grid can be decomposed in two components,
the cost of scheduled interchange (CgrSI) and cost of unscheduled interchange (CgrUI), as
indicated by (2.6).
C gr ( Pgr ) = C grSI ( PgrSI ) + C gr
UI
( PgrUI , f ) (2.6)

According to ABT mechanism, the cost of scheduled interchange from grid is as per a
simplistic energy rate (Erate) in $/MWh, and is given by (2.7).
C grSI ( PgrSI ) = Erate * PgrSI (2.7)

Whereas cost of unscheduled interchange is dependent on the grid frequency conditions

and is given by (2.8)
C gr ( PgrUI , f ) = UIrate( f ) * PgrUI (2.8)

The function UIrate(f) is defined by relation of UI Rate to frequency as shown in Table

2.3. While formulating the above equations for modified ELD problem the following
assumptions have been made.
• Grid interconnection to the system is represented by a generator of very high
rating and fixed terminal voltage.
• Re-dispatch of load in the area under consideration will have negligible influence
on the frequency conditions in the grid.
Chapter 2 46

• The dispatch is calculated for every 15 minute slot during which the system
conditions are assumed to be static
In this study the ELD problem is solved for multiple frequency conditions possible in the
grid. Hence, the results have been tabulated by varying the frequency in steps of 0.1 Hz
within a band of 49.0 to 50.5 Hz, as shown in Table 2.4.
Table 2.4 Results of Economic Load Dispatch at Various Frequencies
Frequency UI Rate UI Charge Total Cost GRID G1 G2 G3 G4
(Hz) ($/MWh) ($/h) ($/h) (MW) (MW) (MW (MW) (MW)
50.5 0 0 3402.70 395.82 10 5 5 5
50.4 2.3649 459.87 3862.60 394.46 10 5 5 5
50.3 4.7297 919.74 4322.50 394.46 10 5 5 5
50.2 7.0946 1379.60 4782.40 394.46 10 5 5 5
50.1 9.4595 1839.50 5242.20 394.46 10 5 5 5
50.0 11.824 1333.30 5625.70 312.76 90.815 5 5 5
49.9 14.189 226.18 5776.40 215.94 189.09 5 5 5
49.8 16.554 88.69 5790.40 205.36 200 5 5 5
49.7 18.919 8.60 5802.50 200.45 200 5 9.5434 5
49.6 21.284 -904.37 5746.90 157.51 200 5 50 5
49.5 23.649 -1209.80 5644.60 148.84 200 13.009 50 5
49.4 26.014 -2560.40 5467.00 101.57 200 57.43 50 5
49.3 28.378 -2869.70 5228.10 98.879 200 60 50 5
49.2 30.743 -3108.80 4989.00 98.879 200 60 50 5
49.1 33.108 -3745.90 4744.90 86.859 200 60 50 16.032
49.0 35.000 -4926.90 4504.70 59.232 200 60 50 41.643

The result of ELD at different frequency, as given in Table 2.4, gives us insight
into how the re-dispatch of state’s generation should be done and how the drawal from
grid should change, if the frequency rises or falls beyond 50.0 Hz. The output of state
generators and grid at different frequencies is also plotted in Figure 2.19. Some important
observation can be made from this chart. At a frequency above 50 Hz, it will be beneficial
for state to draw more power from grid as UI Rate is less and Grid power is coming cheap
as compared to any other source. At frequencies below 50.0 Hz, grid power is becoming
costlier, therefore state will be benefited by under-drawing from grid. They can now look
for other sources of power, which are now cheaper as compared to grid power. As shown
in Figure 2.19, G3, G2 and then G4 also start participating in load dispatch as frequency
drops below 49.8 Hz.
Chapter 2 47

450
400
350
300
P (MW)

250
200
150
100
50
0
50.7

50.5

50.3

50.1

49.9

49.7

49.5

49.3

49.1

48.9
Frequency (Hz)

G1 GRID G2 G3 G4

Figure 2.19 Load dispatch at various frequencies

Participation of generators in the re-dispatch is determined by their cost
effectiveness. As the frequency is moving down, first the least expensive generator (G1 in
this case) will participate and then the next cheaper (G3) and so on. As the frequency is
moving up or down, by strategically re-dispatching rather than sticking to the scheduled
interchange, states can save cost. As illustrated in Figure 2.20, the cost of dispatch on
sticking to SI remains at $5802.5 at all frequencies, as UI is zero. Whereas cost reduces
on deviating from schedule on the basis of ED at high and low frequencies.
At low frequency states can even earn UI by under drawing from grid. But to
achieve this, they must either be able to curtail their load or have access to some other
generators who may be IPPs, licensees or state owned having higher cost as compared to
grid at normal frequency.
The marginal cost or the bus incremental cost is the Lagrange multiplier of (2.2),
the power balance equation in the ELD problem. If the variation of marginal cost of
power with frequency at different buses in the system is observed, the variation of
marginal cost is found to be similar to that of the UI Rate. The variation of marginal cost
with frequency at bus 2 is shown in Figure 2.21. This means that incorporation of
frequency dependent UI Rate will also influence the marginal cost of power.
Chapter 2 48

Total Cost UI Charge Cost with SI

8000

6000

4000

2000
Cost ($)

0
50.5

50.4

50.3

50.2

50.1

50

49.9

49.8

49.7

49.6

49.5

49.4

49.3

49.2

49.1

49
-2000

-4000

-6000
Frequency (Hz)

Figure 2.20 Variation of system cost with frequency

40

35
Marginal Cost ($/ MWhr)

30

25

20

15

10

0
50.4

50.2

50

49.8

49.6

49.4

49.2

49

Frequency (Hz)

Figure 2.21 Variation of marginal cost with frequency at Bus No. 2

Chapter 2 49

2.10 Conclusions
Energy shortage is one of the main challenges that Indian electricity sector faces. Several
reform measures have been initiated by the GoI to boost generation capacity. Although
the shortage is still persisting, the reforms were instrumental in encouraging the trading of
electricity in India and increasing the share of private sector in capacity addition. Another
challenge faced by the sector was in operation of its synchronous regional grids, which
observed wide and rapid fluctuation in frequency before 2002, threatening the grid
security. Introduction of ABT in 2002 led to drastic improvements in the grid frequency
condition.
ABT not only improved the frequency profile of regional grids, but also
encouraged competitiveness and economic efficiency. The study done in this chapter
show that beneficiary states can use economic load dispatch as a tool to minimize their
payments and promote economic efficiency under this new ABT regime. During the high
frequency conditions, they can draw more power from the grid as grid power is less
expensive. Under low frequency conditions they can under-draw from the grid and look
for other sources of power, which are now cheaper. In this way they can not only
minimize their costs but also help in reducing frequency deviations in the grid.
Chapter 3 50

Chapter 3

Unscheduled Interchange Mechanism:

Modelling and Analysis

3.1 Introduction
In the generation shortage scenario of Indian power system, the third component of ABT
– the UI charge acts as a mechanism for regulating the grid frequency. At the same time,
this mechanism offers an opportunity to the participants to exchange ‘as and when’
available surplus energy at a price determined by prevailing frequency conditions [28]. UI
mechanism has been introduced in Indian power system primarily to deal with the
generation deficient scenario. However, it has shown remarkable ability in holding the
Indian Grid together without any need for reserve generation capacity [26]. There is a
need to understand the UI mechanism closely and enhance its ability to deal with trading
of imbalance energy. So far, there have been very few studies [29]-[31] on the role of UI
mechanism in the dispatch decision of various entities in Indian power market.
As discussed in chapter 2, significant efforts have been put in by GoI to encourage
trading of electricity in India. The establishment of day ahead power exchanges in India
has been envisaged in the Electricity Act 2003. In the year 2006, CERC came up with a
staff paper [122] on developing a common platform for trading of electricity in India.
Some authors [123],[124] have also proposed trading models for Indian Electricity
market. Since then, two power exchanges have been set up. Although the volume of
traded electricity is increasing day by day, it is insignificant as compared to the total
energy interchange. At present, most of the generation capacity at present is held by state
owned companies. However, in future Independent Power Producer (IPP) based
generation is likely to grab a substantial share in the generation ownership [125]. Many of
these IPPs will be based on high cost fuels like natural gas and diesel and are less likely to
attract long-term customers. However, they may trade their power through short-term
bilateral trading or through day-ahead power exchanges.
Chapter 3 51

In this chapter, the possible trading of power through UI mechanism, especially

for IPPs with high marginal costs has been examined. A price based generation control
mechanism is modelled, which makes the IPPs comply with frequency linked dispatch
guidelines as per Indian Electricity Grid Code (IEGC). This control automates the
otherwise manual secondary control. A case study has been done on a test system to
illustrate the benefits of UI mechanism in facilitating real-time trading and
simultaneously regulating the frequency. The test system represents the regional
electricity grid of India and has been modelled using Matlab/Simulink [139].

3.2 Trading of Power in India

The bulk electricity supply in India is tied in long-term contracts. The bulk electricity
suppliers are mainly central or state owned generating stations or the Independent Power
producers (IPPs) and the bulk buyers are mainly SEBs/Discos. An appropriate
commission regulates the price of bulk power supply based on Terms and Conditions of
Tariff or as per the Power Purchase Agreements (PPAs). Thus, most of the existing bulk
supply is locked up in long-term contracts having station wise tariff. This tariff is usually
in two parts:
(i) capacity charge
(ii) energy charge
The SEBs/Discos rely mainly on these long-term contracts to serve their customers,
however it is neither feasible nor economical to meet the short-term peaking demand
through long-term contracts. Power trading is essential for meeting short-term demands at
an optimum cost. It also facilitates the sale of short-term surpluses of distribution utilities
so as to optimize their cost of procurement. The Open Access in Inter State Transmission
Regulations of CERC [119] have facilitated power trading in India in an organized
manner. Figure 3.1 shows the various modes of power interchange in Indian power
system. Various trading opportunities available in Indian power market are discussed in
the subsequent sections.

3.2.1 Long Term and Short Term Trading through Open Access
Open Access as stated in Electricity Act 2003 means, “the non-discriminatory provision
for the use of transmission lines or distribution system or associated facilities with such
lines or system by a licensee or consumer or a person engaged in generation in
Chapter 3 52

accordance with the regulations specified by the Appropriate Commission”. As per the
latest CERC regulations [120],[121], Open Access can be granted under three categories:
(i) long term
(ii) medium term
(iii) short term
Long-term access is granted for usage of inter-state transmission system for a period
exceeding 12 years but not exceeding 25 years. Medium term access is granted for a
period exceeding 3 months but not exceeding 3 years. Short-term access is granted for the
usage of inter-state transmission system for a period up to one month at one time. For
short-term open access, the grid operator declares the anticipated power transfer
capability available in the transmission system during the forthcoming three months.
Within the short-term category, reservations on transmission corridors may be made
under any of the following categories:
(i) advance
(ii) first-come first-served
(iii) day-ahead
Power
Transactions in
India

Power Purchase Pool Transactions Bilateral Collective

Agreements (PPAs) (ISGS Pool) Transactions Transactions
(OPEN ACCESS) (Power Exchange)

Scheduled Unscheduled Long Term Medium Term Short Term

Interchanges Interchanges

Advance First-Come Day-Ahead

First-Serve

Figure 3.1 Various modes of power transactions in India

3.2.2 Day-Ahead Trading through Power Exchange

In order to promote power trading in a free power market, CERC has allowed setting up
of energy exchanges. The two energy exchanges operating in India at present are:
Chapter 3 53

(i) Indian Energy Exchange (IEX)

(ii) Power Exchange of India Limited(PXIL)
These exchanges have been developed as market based institutions for providing efficient
price discovery and price risk management to the generators, distribution licensees,
traders, consumers, and other stakeholders. These exchanges coordinate with NLDC,
RLDCs, and SLDCs for scheduling of traded contracts to get up-to-date network
conditions. The participation in exchange operations is voluntary. On daily basis, the
exchange offers a double-sided closed auction for delivery on the following day, which is
termed as day-ahead market. Network constraints are considered in deriving the market-
clearing price and market-splitting approach is used in case of congestion. CERC revised
the regulations for open access in inter-state transmission [120],[121] to include collective
transactions made on a power exchange. These transactions result in a transparent price
discovery and present a balanced portfolio to the system operator through anonymous
bids on a neutral platform. These transactions are processed before the processing of day-
ahead category of bilateral transactions. The total available margins for short-term open
access are assessed by the RLDCs in advance through simulation studies and made
available transparently to the stakeholders through their respective websites. The balance
margin after permitting advance and first-come-first-serve bilateral transactions is the
margin available for scheduling of collective transactions.

3.2.3 Real-time Trading through UI Mechanism

The UI mechanism of ABT scheme provides a simple and transparent balancing
mechanism for all type of power transactions in India. Whether they are long-term
contracts, short-term bilateral trades, or collective trades through energy exchange, all of
them rely on UI mechanism for settlement of deviations from scheduled transactions. The
primary purpose of introducing ABT in Indian system in the year 2002 was to deal with
grid indiscipline prevailing at that time and to ensure grid security through regulatory
measures. Under ABT, each state and each central generating station connected to
regional grid is designated as a control area with schedules of demand and generation
issued one day in advance. These schedules consider central allocation, bilateral trades,
and collective trades through exchange. Deviations from schedules are termed as UI and
charged at a frequency-linked price. They are determined in 15-minute time blocks
through special metering and priced according to the system condition prevailing at that
time. If the frequency is high, UI charge is small and if the frequency is low, UI charge is
Chapter 3 54

high. The introduction of ABT in all regional grids in the country has enabled the
exchange of unscheduled power without any commercial problems. ABT is serving the
dual purpose of providing frequency control service and enabling unscheduled
interchange of surplus power, as and when available in the grid.
The shape of UI price vs. frequency curve has been a subject of much debate
among the sector participants. Regular modifications have been done in the shape of UI
curve since it was introduced in the year 2000. The modifications have been ordered by
CERC, so as to meet the stated objectives of ABT mechanism. Initially, the frequency
range in which UI prices vary was set between 49.0 and 50.5 Hz. In 2009, CERC has
come up latest regulations [126], which set the frequency range between 49.2 and 50.3
Hz.

6
UI Charge( in INR/kWh)

0
49 49.2 49.5 50 50.3 50.5
Frequency (in Hz)

Figure 3.2 UI Rate vs. Frequency as per CERC’s March 2009 Regulation
The UI prices vary inversely with frequency. In the original regulations, the
minimum price was zero INR */kWh at 50.5 Hz and maximum price limit was 4.80
INR/kWh at 49.0 Hz. In the latest regulations, minimum price is zero INR/kWh at 50.3
Hz and maximum price is 7.35 INR/kWh at 49.2 Hz. The UI charge vs. frequency curve
as per CERC’s March 2009 regulations [126] is shown in Figure 3.2. The maximum price
cap is set by CERC to accommodate the highest price generation in the system. Now,
CERC has adopted a process whereby the maximum UI price cap is to be reviewed six
monthly. Additionally, there are kinks (or dual slopes) in the UI curve. In the March 2009

*
INR stands for Indian Rupee (1 US Dollar ≈ 45 Indian Rupee)
Chapter 3 55

UI curve, shown in Figure 3.2, the price varies from 7.35 INR/kWh at 49.2 Hz to 4.80
INR/kWh at 49.5 Hz in steps of 0.17 INR/kWh per 0.02 Hz and from 4.80 INR/kWh at
49.2 Hz to zero INR/kWh at 50.3 Hz, in steps of 0.12 INR/kWh per 0.02 Hz.

3.3 Frequency Regulation in India

The UI mechanism of ABT serves the purpose of a balancing market in real-time. Any
generator or utility is allowed to inject power into the pool or draw power from the pool
at UI charges as long as the frequency is maintained within the stipulated band of 49.2-
50.3 Hz. The frequency is not tightly controlled and is allowed to vary within the band.
The constituents of the power pool need not to exert a tight control over their schedules.
Such a loose power pool, with floating frequency suits a deficient power system like
India. This mechanism of frequency control is quite unlike the AGC or LFC systems
implemented in North American and European power systems where frequency is
controlled very tightly.

3.3.1 Primary Frequency control

Primary frequency control is provided through speed governors, which respond to
frequency changes by varying the turbine outputs. Keeping the governors free to operate
in the entire frequency range enables the smooth control of frequency fluctuations as well
as provides security against grid disturbances. In India, due to wide range of frequency
fluctuations, speed governors were prevented from responding by the utilities with dead
band configuring from 47.5 to 51.5 Hz. Efforts have been made to enable speed
governors respond to entire frequency range, which is known as Free Governor Mode of
Operation (FGMO). IEGC stipulates a FGMO for all generation units connected to the
regional grid [127]. According to IEGC, the droop of the governors should be set between
3 to 6 percent. With implementation of FGMO, system stiffness has increased
significantly and tripping of generator units on high frequency is avoided during grid
disturbances as generation load balance is attained at a faster rate. In case of sudden
frequency fall, all machines under FGMO instantaneously pick up the load until they
reach 105% of the set point. There is no problem in partly loaded machines picking up the
load. However, the machines operating at full load are also required to generate at 105%
of their set points and maintain this level for about 5 minutes using thermal inertia. The
trapped steam in the piping is used to pick up extra load during the frequency fall. In
India, normally all machines are operating at full load due to generation shortages.
Chapter 3 56

3.3.2 Secondary Frequency Control

The secondary frequency control in India is manual, unlike the AGC or LFC systems, and
is linked to the UI prices. The regulator (CERC) has issued frequency linked dispatch
guidelines to all generating stations. According to these guidelines, threshold frequency
for each generator is computed as the frequency at which UI price is equal to the
maximum marginal cost of generation of that generator. In case frequency is below the
threshold frequency for a particular power station, the generating station can increase or
decrease its generation in response to frequency fluctuations as dictated by FGMO, and
come back to original schedule in a slow manner at the rate of 1% MW per minute. In
case the frequency goes above the threshold frequency, the generation unit need not come
back to the original schedule and is free to back down its generation in response to the UI
price signal. Therefore, for a generator, operational guidelines above and below threshold
frequency are different. Figure 3.3 shows the two regions of operation of a generator
whose threshold frequency is 49.8 Hz.

120
B Region I Region II
F
100
C E
A G
D
80
Unit loading %age

60

40

20

0
49.2 49.3 49.4 49.5 49.6 49.7 49.8 49.9 50 50.1 50.2
Frequency in Hz

Figure 3.3 Operational Guidelines and Threshold Frequency

Consider the situation for this generator, when the grid frequency is 49.5 Hz. It
would be operating in Region I at point 100 % loading indicated by point A. Now, if there
is a frequency fall, the generator would pick up load up to 105% of the set-point
instantaneously and operate at point B. The load on the generator is reduced in a slow
Chapter 3 57

manner back to the set-point in about five minutes time and the new operating point
would be C and frequency would stabilize at 49.35Hz. In case of frequency rise, the
generator can reduce output from A to D instantaneously. The load on the generator is
then increased back to E in a slow manner and the frequency stabilizes at 49.65 Hz. Now
consider the case when generator is operating at threshold frequency 49.8 Hz, indicated
by point F. If the frequency rises, the generator will reduce output instantaneously and
operate in Region II at point G. In this region, the generator can continue to operate at
reduced level of generation and need not come to the original set point, hence it may
operate at point H.
Implementation of an automatic secondary control mechanism like LFC or AGC
is not possible in India under present circumstances, as there is a generation shortage.
However, the UI mechanism of ABT itself is meant to provide a secondary level control.
The generation units are expected to respond to the UI price signal in real-time. Although
the wide fluctuations in frequency have been tamed through implementation of UI
mechanism, the frequency profile is still not as smooth as desirable. The generation units
respond to the UI price signal manually, often resulting in a delayed response. This causes
frequency to fluctuate rapidly. Sometimes, the generation units may or may not act in
strict merit ordered dispatch. This results in a higher UI price than expected.

3.4 Price based Generation Control

Since the secondary frequency regulation in India is closely linked to the UI price signal,
a price based generation control would be more suitable to automate the process.
Reference [29] has proposed a price based control mechanism where each generator
receives an error signal proportional to difference in UI price and its marginal cost.
Similar approach has been pursued in this chapter, for implementing automatic
generation control in Indian scenario. However, the price based control proposed in this
section is based on the price based frequency dispatch guidelines explained in Section
3.3. The control action of generator would be different for two regions of operation
depending on the grid frequency. The units operating in Region I are already on full load
and their marginal costs usually would be way below the current UI price. In order to
comply with the provisions of IEGC, the generating units in Region I have to increase or
decrease generation in response to frequency fluctuations and come back to original
schedule in a slow manner at the rate of 1% MW per minute. A price based control in
Region I can be built by comparing the current marginal cost of unit γ to its maximum
Chapter 3 58

marginal cost γmax and feeding their difference as Generation Control Error (GCE). This
control is shown in Figure 3.4 (a). As the marginal cost of unit changes in response to
increase or decrease of generation, the effect of this control is to bring marginal cost back
to γmax, which corresponds to a generation set point of 100%.
For the partly loaded units operating in Region II, GCE is the difference between
UI price ρ marginal cost γ. This type of control is shown in Figure 3.4 (b). Due to this
control, the generator would back down in event of frequency rise above its threshold
frequency. The backing down will occur, until the marginal cost of generation unit
becomes equal to the UI price, ensuring merit order dispatch.
Δf

1
R

γmax Ki Gh Gt ΔPg
s
γ
Pg
h(Pg)

Pg0

(a)
Δf

1
R

f ρ
f0 g(f) Ki Gh Gt ΔPg
s
γ
Pg
h(Pg)

Pg0

(b)
Figure 3.4 (a) Price-based generation control in Region I (b) Price-based generation
control in Region II
Here R is the slope of governor regulation or droop characteristics in MW/Hz , Ki integral
controller’s gain, f0 is the nominal frequency in Hz, Pg0 is the scheduled generation in
MW. Gh is the transfer function of governor hydraulics and Gt is the transfer function of
Chapter 3 59

turbine generator. The frequency error signal Δf is the input to the model and generation
change ΔPg is the output.
The function for calculation of marginal costs is given by (3.1).
γ = h ( Pg ) = c * Pg + b (3.1)

Where c and b are the generator cost coefficients. The maximum marginal cost is
calculated using (3.2).
γ max = c * Pgmax + b (3.2)

Where Pgmax is the maximum output of generator. The equations for calculation of UI
price are defined by (3.3).
ρ = 7350 ∀f ≤ 49.2 Hz
= 4800 + 8500 ( 49.5 − f ) ∀49.2 < f ≤ 49.5 Hz
(3.3)
= 6000 ( 50.3 − f ) ∀49.5 < f ≤ 50.5 Hz
=0 ∀50.5 < f

The UI price in Indian power system varies in discreet steps of 0.02 Hz, as explained in
Section 3.2.3, however a continuous variation of UI prices with frequency has been
assumed in this work.
This equation is based on March 2009 UI curve as shown in Figure 3.2. The proposed
price based control should result in the same outcome as the current manual control
guidelines. The same has been verified in the case study given in next section.

3.5 Case Study: Price based control of IPPs for trading under UI mechanism
In this section, a test system, which closely resembles the grid operation in Indian power
system under current scenario, is simulated. The study is presented in three parts:
(i) First part explains the system setup and illustrates the kind of interaction taking
place between various entities in an Indian system.
(ii) Second part deals with suitability of price based automatic generation control
mechanisms.
(iii) Third part deals with the role of UI mechanism in trading strategy of an IPP.

3.5.1 Indian Test System

As an example of a regional grid, a test system having three states (i.e. three SEBs), three
ISGSs and three IPPs has been considered. The day-ahead generation availability and
demand requirement of various entities in a particular one-hour slot on next day is
analysed. The generation of all ISGS, amounting to 5000 MW, is pooled by the RLDC. It
Chapter 3 60

is then allocated to the three SEBs as per fixed percentage. The share of SEB 1, 2, and 3
being 40, 30, and 30 percent respectively. Each state makes an estimate of its own
generation availability (through SGS) and demand requirement to arrive at deficit/surplus
figure for time slot under consideration. Assuming, State 1 has a demand requirement of
7000 MW and the availability of its own generation resources is 3500 MW. Considering
an entitlement of 2000 MW from ISGS, State 1 has a deficit of 1500 MW. Table 3.1
shows the ISGS entitlement, SGS availability, and SEB requirements of all three states.
From this data, it can be inferred that State 2 faces a deficit of 1000 MW and State 3 has a
surplus of 1000 MW. Since, this information is at the disposal of all entities one day
ahead of the physical scheduling, SEBs can arrange to deal with the deficit / surplus
conditions. In this case, SEBs have the following three options: (a) they can enter into
bilateral contract (day–ahead) (b) they can bid into power exchange and finally (c) they
can choose to over/under-draw under UI mechanism.

Table 3.1 Deficit/Surplus of States in MW

State 1 State 2 State 3
ISGS entitlement 2000 1500 1500
SGS availability 3500 2500 2500
SEB Requirement 7000 5000 3000
Deficit/ Surplus -1500 -1000 +1000
Bilateral Trades +500 +200 -700
Exchange Trades +500 +500 0
Net Deficit/ Surplus -500 -300 +300

It is assumed that the SEBs approach traders to meet their day-ahead deficit/surplus. The
traders are able to arrange a bilateral trade of 500 MW between SEB 1 and SEB 3 and of
200 MW between SEB 2 and SEB 3 as shown in Table 3.1. There is still a 1000 MW
deficit for SEB 1 and an 800 MW deficit for SEB 3, for which they bid in the day-ahead
market. The structure of their purchase bids in day-ahead market is given in Table 3.2.
Coming to the generation side, all ISGSs and SGSs have already committed their
availability to the states. Let us assume that the three IPPs are having a generation
availability of 500 MW each during the considered one-hour slot. They do not have long-
term contracts with any of the SEBs. These IPPs rely only on short-term trading and UI
Chapter 3 61

mechanism to sell their power. They submit their bids in the day-ahead market. The
structure of their selling bids is given in Table 3.3. After matching the sale and purchase
bids in the power exchange, as shown in Figure 3.5, IPP 1, IPP 2, and IPP 3 are able to
sell 500 MW, 300 MW and 200 MW of power respectively. Market clearing price is 6500
INR/MWh. SEB 1 and SEB 2 are able to procure 500 MW each. After accommodating all
bilateral and power exchange trades, there is still a deficit of 500 MW and 300 MW for
states 1 and 2 respectively, as shown in Table 3.1.

Table 3.2 SEB’s bids in INR/MWh (Day-Ahead Market)

Bid 500 300 200
Quantity MW MW MW
SEB 1 7000 6000 5000
SEB 2 6500 5500 X

Table 3.3 IPP’s bids in INR/MWh (Day-Ahead Market)

Bid Quantity 300 MW 200 MW
IPP 1 4500 6000
IPP 2 5000 7000
IPP 3 6500 9000

9500

9000

8500

8000 Market Clearing Price

Bid Price (in INR/MWh)

7500

7000

6500

6000

5500

5000
Market Clearing Quantity
4500

4000
0 200 400 600 800 1000 1200 1400 1600 1800
Bid quantity (in MW)

Figure 3.5 Bid Matching

Chapter 3 62

Table 3.4 Test System Parameters

M (in MW-s/Hz) 3000
D1 (in MW/Hz) 280
D2 (in MW/Hz) 200
D3 (in MW/Hz) 120

Table 3.5 ISGS’s Parameters

ISGS1 ISGS2 ISGS3
b (in INR/MWh) 2000 1500 1500
c (in INR/MWh2) 1800 1500 1200
Pgmax (in MW) 0.3 0.3 0.3

Table 3.6 IPP’s Parameters

IPP1 IPP2 IPP3
b (in INR/MWh) 500 500 500
c (in INR/MWh2) 4000 4500 5000
Pgmax (in MW) 1.5 1.5 1.8

3.5.2 Price-based Generation Control under UI mechanism

In this section, the exchange of power in real-time through UI mechanism has been
examined. Assuming that in the real-time, deficit of SEB 1 and SEB 2 appear as over-
drawal (term used to denote withdrawal of power more than scheduled) and surplus of
SEB 3 appears as under-drawal (term used to denote withdrawal of power less than
scheduled), a model is needed to observe frequency deviations due to these over/under
drawals.
Figure 3.6 shows an approximate AGC model of the test system and data related
to the test system is given in the Table 3.4. Here M denotes the overall inertia of system
and D1, D2 and D3 are damping of loads in SEBs 1, 2 and 3 respectively. Damping in
loads of the three states has been segregated for accounting the UI of these states. The
over/under-drawals of SEBs is represented as step load changes in order to determine the
change in frequency. All generators shown in the model follow the IEGC guidelines
regarding FGMO however, frequency linked dispatch guidelines are followed only by
Chapter 3 63

ISGS. In our case, all of the ISGS being on full load follow a price-based control as
shown in Figure 3.4 (a) until the frequency is less than their respective threshold
frequency. The cost data of the three ISGSs for determining their threshold frequencies is
given in Table 3.5. ΔPga represents the change in generation output of an ISGS.
ΔPga1 ΔPgc1
ISGS 1 SGS 1

ΔPga2 ΔPgc2
ISGS 2 SGS 2

ΔPga3 ΔPgc3
ISGS 3 SGS 3
Δf Δf
ΔPgb1 D1
IPP 1 D2
D3
ΔPgb2 ΔPd1
IPP 2 SEB 1
ΔPd2
SEB 2
ΔPgb3 ΔPd3
IPP 3 SEB 3

+ + + + + + + + + - - -

1
Ms

Δf

Figure 3.6 Model of Test System

As far as the IPPs are concerned, IPP 1 is on full load, whereas IPP 2 and IPP 3
are not fully loaded. IPP 2 and IPP 3 have an option of either sticking to their schedule or
following the UI price signal. Both options have been considered for this study. When the
IPPs follow the UI price signal, IPP 2 and IPP 3 would deploy the price-based control as
shown in Figure 3.4 (b) as long as the frequency is above their respective threshold
frequencies. The cost data of the IPPs for determining their threshold frequencies is given
in Table 3.6. ΔPgb represents the change in generation output of an IPP.

Case A: No secondary response from IPPs regulation.

In this case, ISGS are loaded to their maximum capacity. Although IPPs have surplus
capacity, they do not respond to changes in UI price instantaneously. ISGSs and IPPs run
on FGMO and frequency linked dispatch guidelines. They allow their generators to be
overloaded up to 105% of their set points and gradually come to original setting
Chapter 3 64

offloading about 1% per minute as dictated by frequency linked dispatch setting. Figure
3.7 shows the step response of system to load change from scheduled load.
50

49.8
Frequency (in Hz)

49.6

49.4

49.2

49
0 100 200 300 400 500 600
Time (in s)

8000

7000
UI Rate ( in INR/MWh)

6000

5000

4000

3000

2000

1000
0 100 200 300 400 500 600
Time (in s)

Figure 3.7 Response of Frequency and UI Price (Case A)

A frequency drop below stipulated 49.2 Hz is observed after 300 seconds in this case.
Consequently, the UI price hits its upper peak of 7350 INR/MWh. Figure 3.8 highlights
the action taken by ISGSs due to frequency linked dispatch guidelines. The ISGSs take an
overload of 5% and gradually come to original load in about 300 seconds. This response
is achieved by price based control action as shown in Figure 3.4 (a). The IPPs also show
similar response in this case as shown in Figure 3.8 as they are configured to stay at their
scheduled loads through price-based controls.
The response of load change of the three SEBs is also shown in Figure 3.8. As the
frequency drops, damping of load causes the net load change to decrease. Since, no
additional generation is available in the system, the frequency drops until the point when
all the load change is completely absorbed by damping due to frequency fall. Observing
the individual drawal of SEBs, a continuous increase in over-drawal of SEB 1 and a
continuous decrease in under-drawal of SEB 2 has been observed until the algebraic sum
of three drawals is reduced to zero.
Chapter 3 65

100
ISGS 1
80
Δ Pg of ISGS (MW)
ISGS 2
60 ISGS 3

40

20

0
0 100 200 300 400 500 600
25
IPP 1
20
ΔPg of IPP (MW)

IPP 2
15 IPP 3

10

0
0 100 200 300 400 500 600
1000 SEB 1 SEB 2 SEB 3 Total
Δ Pd of SEB (MW)

500

-500
0 100 200 300 400 500 600
Time (in s)

Figure 3.8 Response of Generation and Load (Case A)

Case B: Secondary response from IPPs.

In this case, the IPPs respond to changes in UI price. IPPs have high marginal cost and
hence their threshold frequency is low. They respond to changes in UI price through a
price-based control as shown in Figure 3.4 (b). Due to the control action of IPPs, the
frequency fall is arrested at around 49.4 Hz as shown in Figure 3.9 and this happens
within first 60 s. The final UI price settles around 5700 INR/ MWh. The results of Figure
3.10 show that at this UI price IPP 2 finds it good enough to supply additional 120 MW
than scheduled. Signal to IPP 3 is also positive and it supplies very small power
(~10MW) in addition to its scheduled supply. Since the threshold of IPP 1 is not
breached, it does not respond to UI price signal.
Observing the load change figures of three SEBs in Figure 3.10, it can be said that
the algebraic sum of load change of all of them in this case does not reduce to zero. The
additional power pumped by the IPPs appears in the load change graphs of the three
states.
Chapter 3 66

50.2

50

Frequency (in Hz) 49.8

49.6

49.4

49.2
0 100 200 300 400 500 600
Time (in s)

6000

5000
UI Rate ( in INR/MWh)

4000

3000

2000

1000
0 100 200 300 400 500 600
Time (in s)

Figure 3.9 Response of Frequency and UI Price (Case B)

100
ISGS 1
80
Δ P g of ISGS (MW)

ISGS 2
60 ISGS 3

40

20

0
0 100 200 300 400 500 600
150
IPP 1
Δ Pg of IPP (MW)

100 IPP 2
IPP 3
50

-50
0 100 200 300 400 500 600
1000 SEB 1 SEB 2 SEB 3 Total
Δ Pd of SEB (MW)

500

-500
0 100 200 300 400 500 600
Time (in s)

Figure 3.10 Response of Generation and Load (Case B)

Chapter 3 67

3.5.3 UI trading by IPPs

The above cases show the real-time operation in a typical Indian scenario. The main
points observed here are that the load damping plays an important role in meeting load
changes. The frequency falls to the extent, when damping in load alone is sufficient to
meet the load changes. The fall in frequency translates into a rise in UI price through UI
mechanism. In this scenario, the UI mechanism offers any generator with surplus
generation an opportunity to pump this generation into grid and make profit if the current
UI price is higher than its current marginal cost of generation. In this way, it not only
meets some portion of load change but also arrests the fall of frequency as shown by
action of IPP2 in Section 3.5.2.
Further, the test system is simulated for one hour of market operation with random
load changes. The load change signals of three SEBs, applied for this case, are shown in
Figure 3.11. During this hour, the IPP2 and IPP3 have been assumed to follow the UI
price signal as in Case B of Section 3.5.2. The aim of this study is to calculate the
revenues earned by generators and payments made by SEBs under UI mechanism.

SEB 1 SEB 2 SEB 3

600

500

400

300

200
ΔPd (in MW)

100

-100

-200

-300

-400
0 500 1000 1500 2000 2500 3000 3500
Time (in s)

Figure 3.11 Load Change for One Hour Simulation

Chapter 3 68

49.8

49.7

Frquency (in Hz)

49.6

49.5

49.4

49.3
0 500 1000 1500 2000 2500 3000 3500
7000
UI Price (in INR/MWh)

6000

5000

4000

3000
0 500 1000 1500 2000 2500 3000 3500
200

IPP1
100 IPP2
Pg (in MW)

IPP3

-100
0 500 1000 1500 2000 2500 3000 3500
time in sec

Figure 3.12 Results of One Hour Simulation

The average frequency and UI price are calculated in four slots of 15 minutes each
as shown in Table 3.7. The calculation for payment being made by SEBs and to IPPs is
on the basis of their UI energy consumption/generation during the 15 min slot multiplied
by the UI rate in that slot. The results of these calculations are indicated in Table 3.8 and
Table 3.9. It is observed that payment by SEB 3 is negative. This highlights the fact that
SEB 3 is receiving payments from the UI pool due to its under-drawal. The payment of
INR 2.14 million received by SEB 3 from the UI pool is a substantial amount, which SEB
3 is able to earn partially due its less load requirement and partially due to its high
allocation in ISGS pool. Observing, the figure of revenues of the IPPs, it can be stated
that IPP 2 has been benefited due to UI mechanism. It earned revenue of INR 0.6 million
in one hour from the UI pool.
Table 3.7 Frequency and UI Rate for each slot
15-min Frequency UI Rate
Slot (in Hz) (in INR/MWh)

1 49.53 4773.50
2 49.38 5794.70
3 49.39 5724.00
4 49.40 5661.90
Chapter 3 69

Table 3.8 Payments by SEBs to UI Pool in INR

15-min slot SEB 1 SEB 2 SEB3

1 471462.99 253973.82 -539928.89

2 510017.70 218866.80 -507896.65
3 470370.81 183489.08 -530289.07
4 432478.98 217783.53 -561893.45
Total 1884330.47 874113.24 -2140008.06

Table 3.9 Revenue Collected by IPPs from UI Pool in INR

15-min slot IPP 1 IPP 2 IPP 3

1 6.16 168198.06 17324.16

2 0.01 185696.77 35162.79
3 0.00 133861.68 -10131.25
4 0.00 115032.99 -26643.92
Total 6.17 602789.49 15711.79

Another important observation from this study is the average UI price paid by
SEBs to the UI pool (and received by ISGSs and IPPs from UI pool) is around 5500 INR/
MWh. This price is less than the market clearing price of 6500 INR/ MWh in the day-
ahead market. If such situation occurs repeatedly, the SEBs facing deficit would prefer to
overdraw from the UI pool, rather than bid in power exchange or arrange bilateral
agreements at a high price. In a power shortage scenario, the UI price ideally should not
be less than market clearing price in a day-ahead market. This situation can be corrected
by raising the maximum ceiling price of UI curve. CERC, in its current regulation [126]
related to UI price has instructed a six monthly revision of UI price ceiling. However,
these revisions, as seen previously, are based on changes in international fuel prices. It
does not take into account the maximum market-clearing price in day-ahead market. Our
suggestion is that the maximum market-clearing price should also be a consideration
while fixing the maximum ceiling of UI curve. This would help in incorporating the
demand-supply gap in UI curve and give an appropriate price signal to the market
participants.
Chapter 3 70

3.6 Conclusions
In this chapter, various options available to the participants of Indian electricity market
for trading electricity have been discussed. Special attention has been given to trading
option available through the UI mechanism. A model of regional grid is presented, which
can be used to analyse the impact of action of various entities like, ISGSs, SEBs, SGSs,
and IPPs on the grid frequency, UI price, and UI energy exchanges of these entities. A
test system having three states (i.e. three SEBs), three ISGS, and three IPPs is taken to
simulate the regional grids. Additionally, a model for price based automatic generation
control for regulating the grid frequency conforming to the operational guidelines given
in IEGC has been proposed. Using the regional grid model, the application of price based
controls by generation entities have been demonstrated in the Indian electricity market
scenario. The response due to these controls has been found to be in conformity with
operational guidelines given in IEGC. The frequency regulation with the adoption of
these controls was found to be better as compared to the current manual control and also
helps in upholding merit-order dispatch during real-time operation. The most important
conclusion drawn from this study is that in order to give appropriate price signal to all
generation entities, the UI mechanism must be synchronized with the price discovered in
the day-ahead markets.
Chapter 4 71

Chapter 4

Frequency Linked Pricing in Real-time

Markets
4.1 Introduction
In Chapter 2 and 3, a bulk power pricing scheme in Indian Power System -ABT
has been discussed in detail. This scheme contains a frequency dependent price
component called UI charge which penalizes the participants for deviations from hourly
schedule. It has been successful in regulating the frequency of Indian grid, since it was
introduced in 2002. Besides providing frequency regulation, UI charge has also created a
real-time market where real-time decision on injecting more/less power than scheduled
can be taken by generators based on the prevailing UI charge. Similarly, loads may
withdraw more/less power from grid than scheduled, considering the frequency
dependent UI charge. The UI charge has a fixed pre-notified relation to frequency. This
makes it possible for all entities to be aware of UI Charge in real-time using a simple
frequency meter. In this manner, cost of communicating real-time prices is also avoided.
Indian experience has shown that there are clear advantages of linking real-time
price to frequency. In this chapter, a new frequency regulation mechanism based on real-
time prices linked to frequency has been proposed. Unlike the UI mechanism, which
works for regulated electricity market of India, the proposed mechanism has taken into
account the restructuring that has taken place in electricity supply industry over the last
two decades. Instead of a static UI curve, this mechanism uses a dynamic UI curve, which
shifts the reference price at nominal frequency simultaneously with the hourly spot
market price. Therefore, the arbitrage opportunity between spot market and real time
market, as pointed out in Chapter 3, is reduced. This mechanism keeps the frequency
within a close range around nominal value during the normal operating conditions. A case
study has been carried out on a test system modelled in Matlab/Simulink [139] to
demonstrate the benefits of the proposed mechanism.
Chapter 4 72

4.2 Price Frequency Relation

The fundamental relation between real-time price, the hourly spot price, and
frequency can be understood from underlying principles of economics and power system
operation. Consider an isolated power system in which hourly schedules are governed by
a day-ahead market. The aggregate supply and demand curves of generators and loads are
given by SS` and DD` respectively, as shown in Figure 4.1(a). The intersection of these
curves represents the economic equilibrium of the hourly spot markets. peq is the
equilibrium price also called the hourly spot price and qeq is the equilibrium quantity also
called the hourly scheduled interchange. In Figure 4.1(b), GG` represents the aggregate
generation governing characteristics and LL` represents the area load frequency response
characteristics. The speed changer settings of all generators are adjusted to deliver
equilibrium quantity at nominal frequency. Hence, the intersection of GG` and LL` occurs
at nominal frequency representing the equilibrium state of power system.
price, D1
supply
p D
S`
equilibrium
price, Δρ
peq

D1 `
S D` demand

equilibrium quantity, q
quantity, qeq
(a)

frequency,
f L` load
G
nominal
frequency, L1`
fnom
Δf

generation
L G`
L1

equilibrium quantity, q
quantity, qeq
(b)

Figure 4.1 (a) Price vs. Quantity (b) Frequency vs. Quantity
Chapter 4 73

Now, during real-time, the naturally occurring fluctuations in demand disturb this
equilibrium and result in frequency deviations. Suppose there is a load increase that
causes load curve in Figure 4.1(b) to shift to L1L1`, correspondingly the equilibrium point
will shift and results in a frequency drop of Δf from nominal value. Consequent effect of
load increase in Figure 4.1 (a) would be a shift in demand curve from DD` to D1D1`. The
equilibrium point will shift and price rises above equilibrium price by Δρ. Similarly, a
load decrease would make the frequency to rise above nominal value and price to fall
below the equilibrium price. Therefore, it can be said that there is an inverse relationship
between frequency and price during real-time operation.
Figure 4.2 shows an inverse linear price-frequency relationship. The relationship
between real-time price and frequency has been taken as linear, assuming the generator
supply curve in Figure 4.1(a) and area governing characteristics in Figure 4.1(b) to be
linear. In actual practice, these curves may be non-linear. So, a linear relation between
price and frequency is just an approximation. However, this approximation will have a
little impact on the operation of proposed real-time market. The assumption of linearity
between frequency and price will keep things simple for all stakeholders in the real-time
market and they would be able to easily convert one quantity into another.

Price
Δρ
Kr = −
Δf
Δρ
λ
Δf

fnom Frequency
Figure 4.2 Price - Frequency Relation

4.3 Proposed Real-time Market

In order to operate a real-time market successfully, a real-time price signal, which can be
determined and transmitted instantaneously, is required. This can be achieved if the
participants of real-time market are aware of price-frequency relation prior to the
occurrence of mismatches in real-time. The SO only needs to declare the slope of curve
Chapter 4 74

shown in Figure 4.2 for each hour, one day before the actual operation. The hourly price
during that hour will be the real-time price at nominal frequency. This price is already
declared in the day-ahead market and is known to everyone. The basic features of the
price based frequency regulation mechanism proposed in this thesis are described as
under:
• Each generator and load can read real-time price using a simple frequency meter
and prior knowledge of price-frequency relation. There is no need for any control
and communication setup between the SO and generating stations for frequency
regulation.
• The real-time price has an inverse relation with frequency. It rises with fall in
frequency. This encourages generators to increase their production till marginal
revenues are equal to their marginal costs. On the other hand, a frequency rise will
result in fall of real-time price. This would encourage generators to decrease
production till marginal revenues are equal to their marginal costs. The control is
decentralized as each generator and load takes its own decision.
• Each generator will be paid by the prevailing real-time price for their unscheduled
interchanges only. Similarly, all loads will pay for their unscheduled interchanges
by the real-time price.

4.4 Price Based Generation Control Model

Although the proposed mechanism has ability to generate response from loads as well as
generators, the work presented in this chapter is focused only on the generation control. A
new price based automatic generation control model, as shown in Figure 4.3, is proposed.
The layout of this scheme is based on the conventional isolated area AGC model
described in Chapter 1. Here M represents the combined system inertia in MWs/Hz. D is
the load damping in MW/Hz. Load change due to damping is shown separately in this
model, as it is important to calculate the UI of load by taking into account the damping.
Damping of load plays a critical role in this scheme. The net load change, ΔPdr is
composed of applied load change and frequency load response as given by (4.1).
ΔPdr = ΔPd + DΔf (4.1)

In the proposed model, the generators are rational entities and act independently to
maximize their profits or savings. Figure 4.4 depicts a price based automatic generation
control mechanism for a generator participating in the proposed real-time market. In this
Chapter 4 75

control, the primary loop is retained and the functions of secondary and tertiary loop are
clubbed together, resulting in simultaneous control of frequency and establishment of
economic order among generators.
Δρ Δf
-Kr

1
R1
Δρ KI1 ΔPe1 1 ΔPv1 ΔPg1
1
s 1+sTh1 1+sTt1
Δγ1
c1

Δf
1
R2
Δρ KI2 ΔPe2 1 ΔPv2 ΔPg2
1
s 1+sTh2 1+sTt2
Δγ2 Δf
c2 1
Ms
ΔPdr
ΔPd

D
Δf
1
Rn
Δρ ΔPen ΔPvn ΔPgn
KIn 1 1
s 1+sThn 1+sTtn
Δγn
cn

Figure 4.3 Price-based AGC Model of an Isolated Area System

-Kr Δf

Δρ 1
R

KI ΔPe 1 ΔPv 1 ΔPg

s 1+sTh 1+sTt

Δγ
c

Figure 4.4 Generation Control Based on Real-Time Prices

Chapter 4 76

In this scheme, there are two additional signals apart from those in the
conventional AGC model discussed in Section 1.4. Real-time price ρ is governed by the
inverse price-frequency curve described in Section 4.2. The change in real-time price, Δρ
corresponding to the change in frequency is given by (4.2).
Δρ ( s ) = − K r Δ f ( s ) (4.2)

where, Kr is the slope of price-frequency curve. The marginal cost of generation, γ is

related to the real-time turbine generator power output. If overall cost of generation is
given by a quadratic function, as given in (4.3)
1
Ci ( Pgi ) = ai + bi Pgi + ci Pgi 2 (4.3)
2
The marginal cost is given by (4.4)
dCi ( Pgi )
γi = = bi + ci Pgi (4.4)
dPgi

The change in marginal price, Δγ with change in turbine generator output, ΔPg is given by
(4.5)
Δγ i ( s ) = ci ΔPgi ( s ) (4.5)

The speed changer setting ΔPei of each generator will be commanded by first amplifying
and then integrating the price error i.e. the difference of change in real-time price and
change in marginal cost.
ΔPei = K Ii ∫ ( Δρ − Δγ i )dt (4.6)

Taking Laplace transform of (4.6), the change in speed changer setting is given by (4.7)
K Ii
ΔPei ( s ) = ⎡ Δρ ( s ) − Δγ i ( s ) ⎤⎦ (4.7)
s ⎣
This change in speed changer setting results in each generator to operate at its economic
operating point. This happens in a decentralized manner i.e. due to the individual action
of every generator and without any intervention or instruction by the control centre. At
the same time this control will not bring the frequency error to zero unlike the
conventional control. There will be a steady state frequency error as shown in the
following analysis.
Assuming that the action of speed governor plus turbine generator is instantaneous
compared to the rest of power system, we can set time constants Th = 0 and Tt = 0. As a
result, the relations can be simplified and the change in speed changer setting is given by
(4.8).
Chapter 4 77

K Ii ⎡ ⎧ 1 ⎫⎤
ΔPei ( s ) = ⎢ − K r Δf ( s ) − ci ⎨ΔPei ( s ) − Δf ( s ) ⎬⎥ (4.8)
s ⎣ ⎩ Ri ⎭⎦
further simplifying equation (4.8)
K Ii ( ci / Ri − K r )
ΔPei ( s ) = Δf ( s ) (4.9)
s + ci K Ii
For a step load change of constant magnitude S, the change in system frequency is given
by (4.10)

1 ⎡ ⎧ 1 ⎫ S⎤
Δf ( s ) = ⎢ ∑ ⎨ΔPei ( s ) − Δf ( s ) ⎬ − ⎥ (4.10)
Ms + D ⎣ i ⎩ Ri ⎭ s⎦
Substituting ΔPei from (4.8) and simplifying the relation, the change in system frequency
is obtained, as given in (4.11)
S
s ( Ms + D )
Δf ( s ) = − (4.11)
1 s + K r K Ii Ri
1+ ∑
Ms + D i Ri ( s + ci K Ii )

Using final value theorem, steady state frequency error can be determined as in (4.12)
S/D S
Δf ss = lim ⎡⎣ sΔf ( s ) ⎤⎦ = − =− Hz (4.12)
1 Kr 1
1+ ∑ D + Kr ∑
s →o

D i ci i ci

Unlike the conventional AGC, this scheme does not try to bring frequency error to
zero. Grid frequency floats around nominal value as there is always a steady state error
given by (4.12). According to (4.12) the frequency deviation under the proposed control
will depend on the load frequency response D, slope of price-frequency curve Kr and cost
coefficient of generators ci. The parameter ci is a private information of generators and is
not under the control of the SO. However, the SO can control the range in which
frequency varies by setting an appropriate value of Kr. It has been shown later in the case
studies that grid frequency does not deviate significantly from the nominal value for
normal load changes under the proposed scheme.
Further, the control areas in this scheme are only notional and are not required to
absorb their own load changes fully. There is no requirement for control areas to maintain
actual interchange close to their net interchange or to reduce ACE to zero in every 5 or 10
minutes. Actual interchange between control areas can remain deviated from scheduled
interchange since all deviations will be priced at the prevailing real-time price. Hence,
Chapter 4 78

this mechanism is also applicable to multi-area systems within the domain of a single
wholesale electricity market.

4.5 Case Studies

The operation of proposed real-time market has been illustrated by simulating a test
system. The test system is an isolated area of 5000 MW capacity having four Gencos. The
parameters of isolated area are given in Table 4.1 and the capacity and cost data related to
Gencos is shown in Table 4.2. The system is simulated using Matlab/Simulink [139] for
following three cases:
(a) Normal Load
(b) Peak Load
(c) Off-peak Load

Table 4.1 Isolated Area Parameters

M (in MW-s/Hz) 1000
D (in MW/Hz) 200
Kr (in INR/Hz) 5800

Table 4.2 Genco Parameters

Parameter Gencos
G1 G2 G3 G4
b (in INR/MWh) 800 1600 2400 3600
c (in INR/MWh2) 1 1.5 2 2.5
Pgmax (in MW) 1500 1500 1000 1000

Table 4.3 Case Study Data

Cases Pg0 (in MW) Λ
G1 G2 G3 G4 (in INR/MWh)
Off-Peak Load 300 0 0 0 1100
Normal Load 1500 1000 350 0 2900
Peak Load 1500 1500 1000 700 5250
Chapter 4 79

7000

6000 MCP
= 5250 INR/MWh

5000
System marginal price (in INR/MWh)

4000

MCP
= 2900 INR/MWh PeakLoad
= 4700 MW
3000

2000
MCP
= 1100 INR/MWh Normal Load
= 2600 MW
1000
Off-PeakLoad
= 300 MW

0
0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000
Total generated power (in MW)

Figure 4.5 System Supply Cost Curve

12000
normal load
peak load
off-peak load
10000

Kr = 5800

8000

6000
ρ in INR/MWh

5250 INR/MWh

4000

2900 INR/MWh

2000

1100 INR/MWh

0
49.595 Hz 50.3 Hz

-2000
49 49.2 49.4 49.6 49.8 50 50.2 50.4 50.6
f in Hz

Figure 4.6 Price-Frequency Curves

Chapter 4 80

Figure 4.5 shows the overall system supply curve. All Gencos have been assumed to bid
true to their cost in the day ahead market and the system demand is taken as inelastic.
MCPs for all cases can be arrived at from the system supply curve assuming a demand of
2600 MW in normal load case, 4700 MW in peak load case and 300 MW in off-peak load
case. The initial loading of each Genco and MCP for each case is shown in Table 4.3. The
allowable range of frequency deviations in this study has been assumed to be from 49.5 to
50.0 Hz. The price frequency curve taken for each case is also depicted in Figure 4.6.

4.5.1 Normal Load Case

Considering the system load in this case to be 2600 MW,
Table 4.3 shows the MCP and loading of all Gencos. At an MCP of 2900 INR//MWh, G1
is fully loaded at 1500MW, G2 and G3 are partially loaded at 1000 MW and 350 MW
respectively. Genco G4 is not loaded. Assuming Kr = 5800 INR/Hz, the price-frequency
relation for this case is shown by the blue curve in Figure 4.6.

50.02 3200
Frequency in Hz

ρ in INR/MWh

50
3100
49.98
3000
49.96

49.94 2900
0 5 10 15 20 25 30 0 5 10 15 20 25 30

50 1

0.5
Δ Pg1 in MW
Δ Pdr in MW

45 0

-0.5

40 -1
0 5 10 15 20 25 30 0 5 10 15 20 25 30

40 30

30
Δ Pg2 in MW

Δ Pg3 in MW

20
20
10
10

0 0
0 5 10 15 20 25 30 0 5 10 15 20 25 30

Figure 4.7 Response to a step load increase of 50 MW (Normal Load)

First, a step load of magnitude +50 MW is applied to observe the response of
price based control of generators. It can be seen from Figure 4.7 that due to a +50 MW
load increase there is a rapid fall in frequency initially. The real-time price, due to its
Chapter 4 81

inverse relation with frequency, rises rapidly during this period. In the initial state, the
marginal cost of partially loaded units is same as the MCP. However, due to load
perturbation real-time price rises and both G2 and G3 get a price error command
corresponding to difference between the real-time price and their respective marginal
costs. G2 and G3 raise their production in response to the price based control action, until
the marginal cost of G2 and G3 and real-time price converge to a same level. In case of
load increase of +50 MW, the real-time price settles at 2942 INR/MWh and
correspondingly the frequency settles at 49.993 Hz. The frequency error of 0.007 Hz can
also be predicted by taking S as 50, D as 200, Kr as 5800, c1 and c2 as 1.5 and 2
respectively in expression for steady state frequency error (4.12).

50.08 2900
Frequency in Hz

50.06
ρ in INR/MWh
2800
50.04
2700
50.02

50 2600
0 5 10 15 20 25 30 0 5 10 15 20 25 30

-40 0

-2
Δ Pg1 in MW
Δ Pdr in MW

-45 -4

-6

-50 -8
0 5 10 15 20 25 30 0 5 10 15 20 25 30

0 0
Δ Pg2 in MW

Δ Pg3 in MW

-10 -10

-20 -20

-30 -30
0 5 10 15 20 25 30 0 5 10 15 20 25 30

Figure 4.8 Response to a step load decrease of 50 MW (Normal Load)

Next, a step load change of -50 MW is applied, for the same initial conditions and
results are shown in Figure 4.8. It was observed that in the first few seconds, frequency
rises rapidly and the real-time price falls. As the real-time price becomes less than the
initial marginal cost of G2 and G3, these Gencos get a price error command to reduce
their outputs. G2 and G3 decrease their output until their marginal costs and real-time
price balance. In steady state, the real-time price for a 50 MW load decrease is 2858
INR/MWh and frequency settles at 50.007 Hz.
Chapter 4 82

Therefore, it can be concluded that price based control responds to both positive
and negative load perturbations in a desired manner and stops the rapid fall or rise of
frequency. At the same time, it is also noted that due this control action, the frequency is
not reduced to zero in either case. The system settles at a final frequency as dictated by
real-time price on the price-frequency curve. The Gencos take a suitable control action in
response to real-time price changes and as a result reach their economic operating point.
Hence, the twin objectives of controlling the frequency and ensuring economic order
among Gencos is achieved. All this happens in a decentralized manner without any
interference by the SO.

50 4500
Frequency in Hz

ρ in INR/MWh
4000
49.9
3500
49.8
3000

49.7 2500
0 50 100 150 0 50 100 150

400 150
ΔPg4 in MW
Δ Pdr in MW

380 100

360 50

340 0
0 50 100 150 0 50 100 150

300 200

150
Δ Pg2 in MW

Δ Pg3 in MW

200
100
100
50

0 0
0 50 100 150 0 50 100 150

Figure 4.9 Response to loss of 400 MW generation (Normal Load)

The case of loss of a large generation has also been simulated to see whether price
based control can handle such eventuality. For the model shown in Figure 4.3, the loss
some amount of generation can be equivalently represented by a same amount load
increase. Loss of a 400 MW unit is simulated and response is shown in Figure 4.9. The
initial drop in frequency is 0.3 Hz, however price based control action reduces the
frequency error to 0.06 Hz. Therefore, if the resultant change in frequency due to
contingency is not severe, it can be left to real-time market to respond and correct the
frequency error. If the resultant change in frequency is severe and frequency deviations
Chapter 4 83

are out of certain prescribed limits, the SO must interfere and take emergency measures to
restore the frequency.
It is also observed that because of steady state frequency error some amount of
generation contribution due to governor action will always be there. Since, it would be
difficult to measure the generation contribution due to primary loop and price based loop
separately, it is proposed that the net generation change be paid by the real-time price.
Similarly, some amount of load reduction due to load frequency response characteristics
would also be there. The net load change ΔPdr is also shown in all responses from Figure
4.7 to Figure 4.9.

50 5700

49.9 5600
Frequency in Hz

ρ in INR/MWh
49.8 5500

49.7 5400

49.6 5300

49.5 5200
0 5 10 15 20 25 30 0 5 10 15 20 25 30

50 50

40
45
ΔPg4 in MW
Δ Pdr in MW

30

20
40
10

35 0
0 5 10 15 20 25 30 0 5 10 15 20 25 30

Figure 4.10 Response to a step load increase of 50 MW (Peak Load)

4.5.2 Peak Load Case

In this case the system load is increased to 4,700 MW. The MCP at this load is 5250
INR/MWh as per the system supply curve show in Figure 4.5. The load sharing of each
Genco at this MCP is shown in Table 4.3. All Gencos except G4, which is supplying 700
MW, are fully loaded. According to our proposal, with the change in MCP, the price–
frequency curve will also shift as shown by the green curve in Figure 4.6. The advantage
of shifting price-frequency curve with system loading will become obvious as we
Chapter 4 84

compare the simulated frequency for this case with the frequency obtained by following a
fixed price-frequency relation. If the price-frequency relation is fixed, the base frequency
at which the system operates has to be shifted, as it is done presently in the Indian power
grid. Therefore, if the load changes to 4700 MW and the same price-frequency relation as
in normal load case is used, the system has to be operated at a base frequency of 49.595
Hz, as shown in Figure 4.6. Whereas, if we shift the price-frequency curve, the base
frequency at which system operates will remain at 50.0 Hz.
A load change of +50 MW is applied and results are shown in Figure 4.10. In the
frequency plot, blue plot indicates the variation of frequency when we shift the price-
frequency relation, whereas green plot indicates the variation of frequency when price-
frequency relation is fixed. Since, all Gencos are on full load only G4 has the capacity to
respond to change in real time price. From (4.12) the steady state error should be 0.02 Hz.
It is observed from Figure 4.10 (blue plot), that the frequency converges to 49.98 Hz i.e. a
steady state error of 0.02 Hz from the base frequency of 50 Hz and in the same figure
(green plot), frequency converges to 49.575 Hz i.e. a steady state error of 0.02 Hz from
the base frequency of 49.595 Hz. Therefore, a fixed price-frequency relationship will
result in large deviation from nominal frequency, whereas if the price-frequency curve is
shifted with change in system loading, the frequency remains close to the nominal
frequency. However, the response of real-time price, generation, and load is same in both
cases. The real-time price settles at a value of 5365 INR/MWh.
Next, the response of peak loaded system to a loss of 400 MW unit is observed.
Interestingly, there is only 300 MW of surplus capacity in the system. The results of
simulation are shown in Figure 4.11. The Genco G4 responds to the initial fall in
frequency (and corresponding increase in real-time price) by increasing its generation by
300 MW and thereby generating at its full capacity. Still there is a 100 MW gap between
supply and demand, which is met by load reduction due to load frequency response. The
frequency error in this case is found to be 0.5 Hz and is largely determined by the load
frequency response characteristics D. Again, it has been established that a fixed price-
frequency relation will result in steady state frequency of 49.195 Hz (green plot), which is
very low and unacceptable making the system operator to respond by taking emergency
measures. However, with hourly varying price frequency relations the frequency settles at
49.5 Hz.
The real-time price rises initially corresponding to drop in frequency and finally
settles at 8150 INR/MWh. This price is exceedingly high when compared to the highest
Chapter 4 85

generation cost in the system. The real-time price signal, in the generation deficient
situation described above, will encourage the other high cost sources of generation in the
system to begin supplying energy into the grid. These sources may be those which were
not able to participate in the day-ahead markets due to their high bids e.g. natural gas
based plants or those which are unable to commit energy in advance e.g. captive
generation plants and non-conventional energy plants. Such power plants can sell their
power instantaneously in the proposed real-time market purely on the base of real-time
price signal available at their point of connection and without any hassle of making prior
sale agreements.

50 10000

9000
Frequency in Hz

49.5
ρ in INR/MWh

8000

7000
49
6000

48.5 5000
0 50 100 150 0 50 100 150

400 300

250

350 200
ΔPg4 in MW
Δ Pdr in MW

150

300 100

50

250 0
0 50 100 150 0 50 100 150

Figure 4.11 Response to loss of 400 MW generation (Peak Load)

4.5.3 Off-peak Load Case

Let us consider an off-peak load scenario when system load is only 300 MW. Under these
loading conditions the market clears at a price of 1100 INR/MWh and only G1 is loaded
by 300 MW as shown in Table 4.3. Rest of the Gencos are not dispatched. The new price-
frequency relation is shown by the red curve in Figure 4.6. The results of simulation after
applying a load perturbation of -50 MW are shown in Figure 4.12. Again we compare the
frequency response due to fixed price-frequency relation with the proposed hourly
Chapter 4 86

shifting price-frequency relation. For the case of fixed price frequency relation, the
frequency settles around a base frequency of 50.3 Hz (as shown in Figure 4.6) with a
steady state error of 0.0083 Hz. For the case of varying price-frequency relation, it settles
at 50.0083 Hz. The advantage of using variable-price frequency relation is visible in this
case too.

50.4 1100

50.3 1000
Frequency in Hz

ρ in INR/MWh
50.2 900

50.1 800

50 700
0 5 10 15 20 25 30 0 5 10 15 20 25 30

-35 0

-10

-40 -20
ΔPg1 in MW
Δ Pdr in MW

-30

-45 -40

-50

-50 -60
0 5 10 15 20 25 30 0 5 10 15 20 25 30

Figure 4.12 Response to a step load decrease of 50 MW (Off-peak Load)

Sometimes there are certain kinds of generation in a system which must run at all
costs. Examples of such sources are nuclear generation, wind power, and combined heat
and power generation. In some electricity markets, increased share if such sources in
generation mix has even led to negative market clearing prices. To see the impact of
presence of such generation on the proposed real-time market and frequency regulation
mechanism, let us suppose that out of 300 MW of dispatched generation, 250 MW is
must run at all costs. Now assuming a sudden loss of 150 MW demand due to
transmission line contingency, the frequency response under such circumstances is
analysed. Since, G1 has a capacity to back off by only 50 MW, the supply still exceeds
demand by 100 MW. This supply-demand gap of 100 MW can only be taken up by load’s
frequency response characteristics. The frequency rises to the extent that the increase in
frequency responsive load and backed-off generation balance out the loss of load due to
Chapter 4 87

transmission contingency. The results of simulating this case are shown in Figure 4.13.
For a fixed price-frequency relation the final frequency outcome is 50.8 Hz. This
frequency is out of the acceptable range and will force the SO to take emergency
measures.

51 2000

50.8
1000
Frequency in Hz

ρ in INR/MWh
50.6
0
50.4

-1000
50.2

50 -2000
0 10 20 30 40 50 60 0 10 20 30 40 50 60

-50 0

-10
ΔPg1 in MW
Δ Pdr in MW

-20
-100
-30

-40

-150 -50
0 10 20 30 40 50 60 0 10 20 30 40 50 60

Figure 4.13 Response to loss of 150 MW of load (Off-peak Load)

However, with the shifted price frequency relation frequency settles at 50.5 Hz
which is acceptable. The most fascinating aspect of this case is the real-time price which
settles at -1800 INR/MWh. Negative real-time prices implies that any unscheduled
demand consuming additional load in these condition will get paid by a price of 1800
INR/MWh. This would be an appropriate signal for certain types of demand e.g.
commercial battery energy storage systems, plug-in hybrid vehicles etc. to start charging
from grid.

4.5.4 Settlement of proposed real-time market

In order to illustrate the process of settlement in proposed real-time market, the test
system has been simulated for a longer duration of 15 minutes. A random load
perturbation is applied considering a system loading scenario similar to one in Section
4.5.2. Two additional Gencos G5 and G6, whose parameters are shown in
Chapter 4 88

Table 4.4, are assumed to participate in the real-time market. The results of simulation are
shown in Figure 4.14. G5 and G6 respond purely to the real time price and are assumed to
be not exercising any primary control action.

50
Frequency in Hz

49.5

49
0 100 200 300 400 500 600 700 800 900
10000
ρ in INR/MWh

8000

6000

4000
0 100 200 300 400 500 600 700 800 900
500
Δ Pdr in MW

400

300

200
0 100 200 300 400 500 600 700 800 900
300
Δ Pg4 in MW

200

100

0
-100 0 100 200 300 400 500 600 700 800 900
60
Δ Pg5
Δ Pg in MW

40
Δ Pg6
20

0
0 100 200 300 400 500 600 700 800 900

Figure 4.14 Simulation of real-time market for 15 minutes

Table 4.4 Parameters of additional Gencos

Parameter Gencos
G5 G6
b in INR/MWh 5800 6300
c in INR/MWh2 3.5 4.5
Pgmax in MW 200 200
Chapter 4 89

Revenue of G4

1946000

1945000

Revenue (in INR) 1944000

1943000

1942000

1941000

1940000
1 sec 1 min 5 min 15 min
Time of Integration

(a)

Revenue of G5

280000

275000
Revenue ( in INR)

270000

265000

260000

255000

250000
1 sec 1 min 5 min 15 min
Time of Integration

(b)

Revenue of G6

185000
184000
183000
Revenue (in INR)

182000
181000
180000
179000
178000
177000
176000
175000
174000
1 sec 1 min 5 min 15 min
Tim e of Integration

(c)
Chapter 4 90

Payment by Load

2405000

2400000
Payment (in INR) 2395000

2390000

2385000

2380000

2375000
1 sec 1 min 5 min 15 min
Time of Integration

(d)
Figure 4.15 Revenue/Payments for 15 min simulation using different times of
integration
The process of settlement of proposed real-time market is very simple and
transparent. The payment for unscheduled interchanges of both generators and loads are
made on the basis of real-time price. Although a real-time price is available every second,
to reduce the complexity in accounting, it would be advisable to integrate UI energy over
a period of time and charge it by the average real-time price over this period. For
selecting a suitable time of integration, a comparison of total revenue collected by G4,
G5, and G6 and payment made by load during the 15 min period assuming an integration
time period of 1 sec, 1 min, 5 min and 15 min respectively is made. Results of this
analysis are shown from Figure 4.15 (a), (b), (c) and (d). It is observed that there is not
much difference in the payments for integration time period of 1 sec, 1 min and 5 min.
However, in case of 15 min integration time period the payments vary significantly.
Therefore it can be concluded that a 5 minute integration time period would be suitable
enough to reduce complexities in accounting.

4.6 Conclusions
In this chapter, an alternate frequency control mechanism based on frequency linked price
signals is presented. Main advantage of this mechanism is that it creates a real-time
market, where current price can be known by any participant by simply sensing the grid
frequency. Equipped with knowledge of price in real-time they can take economic
decisions regarding their unscheduled supply or demand. Simulation of test system is
carried to show that the proposed mechanism is decentralized, simple, and results in
Chapter 4 91

economically efficient outcome. Although this mechanism does not drive the frequency
error to perfect zero, it is shown that frequency error can be very small for normal load
deviations. In comparison to the UI mechanism, working presently in Indian electricity
grids, the proposed mechanism gives considerably less deviations from nominal
frequency. Even for large load change or loss of large generators, the system holds
together and gives adequate economic signal to generators to take appropriate action. For
the purpose of settlement in the real-time market, it is sufficient to integrate the UI energy
consumption and real-time price over a period of five minutes, without much compromise
in the revenue and payments of generators and loads.
Chapter 5 92

Chapter 5

Dynamic Demand Control in Real-time

Market
5.1 Introduction
The real-time market described in Chapter 4 gives opportunity to all the generators and
loads connected to the grid to make real-time economic decisions, regarding their
generation and consumption, based on the real-time price signal. Our focus in this chapter
is on the control options exercised by the load serving entities or distribution companies
(Discos). Demand control by Discos based on real-time price signal has a potential to
yield significant benefit to them and ultimately to the consumers. This chapter proposes a
novel demand response (DR) method for real-time markets. The idea is to exercise real-
time control of some loads based on frequency linked real-time prices. This technique has
been termed as Dynamic Demand Control (DDC).
Though all types of loads can be controlled through this mechanism, thermal
loads are the most suitable ones as their contribution to demand peaks is significant. The
thermal load incorporates all such loads which are thermostatically controlled such as air-
conditioning, space heating, water heater, refrigerator etc. Short et al. [55], has chosen
refrigeration load in UK electricity market as a candidate for frequency based DDC. This
control has shown the stabilization of grid frequency in face of increase in demand or loss
of generation.
Air conditioning load has been selected for DDC application in this chapter. A
physically based model of air conditioner load is taken to simulate the load control. A
smart thermostat is proposed that changes the temperature setting of the thermostat with
deviations in grid frequency or real-time price. Few examples are simulated in
Matlab/Simulink [139] to show the load reductions achieved by dynamic demand control
in a single air conditioner, a group of large number of air conditioners, and a real-time
market.
Chapter 5 93

5.2 Dynamic model of thermostatically controlled air conditioning load

Demand for heating and cooling in residential and commercial sectors are the major
contributors to the occurrence of system peaks. These loads are usually thermostatically
controlled and are cyclic in nature.
A dynamic model for temperature of a house regulated by thermostatically driven
air-conditioning load is presented in [128]. The model can be described using (5.1).
dT T f − T − wTg
= (5.1)
dt τ
Where
τ is the effective thermal constant of a house,
T is the internal temperature of a house,
Tf is the ambient temperature,
Tg is the temperature gain of the air-conditioner, and
w specifies the state of thermostat (1-on, 0-off).

w Pstc
Tf 1 1
τ s Kw
dT
dt T
Thermostat
Tg

Figure 5.1 Dynamic model of thermostatically controlled air conditioning load

Temp

ON

Tst+ΔT
Tst NO ACTION

Tst-ΔT
OFF

Figure 5.2 Conventional static thermostat control

Chapter 5 94

Dynamic model of a thermostatically controlled air conditioning load is shown in

Figure 5.1. The most important component of this model is the thermostat control.
Conventionally, the thermostatically controlled loads operate on the following logic: Let
Tst be is the thermostat setting. The upper and lower limit for internal temperature is
Tst+∆T and Tst-ΔT respectively where ∆T specifies the range of thermostat dead band.
Whenever T > Tst+∆T and thermostat is in off state, it would be switched on; and
whenever T < Tst-∆T and thermostat is in on state, it would switch off. This conventional
thermostat control is also shown in Figure 5.2 and is termed as Static Thermostat Control
(STC). If Kwi is the power rating of the air conditioner, Pstci the power demand due to air
conditioner under STC is given by (5.2)
Pstci = K wi wstci (5.2)

The aggregate impact of a large number of small air conditioning loads can be
modelled using stochastic aggregation [129] or Monte Carlo simulations [130]. Monte-
Carlo simulation technique as described in [130] has been applied in this chapter.
Considering a group of N air conditioners, the uncertainties in the system are taken into
account by assuming normal distribution of parameters Tg, τ and Tf.. Then Pstci of all N air
conditioners are summed to find overall consumption due to the group as given in (5.3).
N
Pstc = ∑ Pstci (5.3)
i =1

5.3 Dynamic Demand Control Model

By varying the thermostat setting of air conditioning loads, their power consumption can
be shifted from tens of minutes to a couple of hours. This makes these loads ideal
candidates for DDC. Dynamic model of thermostatically controlled air conditioning load
using a smart thermostat is shown in Figure 5.3.
Δf

FBTC
ΔTst
1 1 wfbtc Pfbtc
Tf Kw
τ dT s
dt T
Smart
Thermostat
Tg

Figure 5.3 Dynamic model of thermostatically controlled air conditioning load using
a smart thermostat
Chapter 5 95

max λ min Price

ρ ρ
Temperature

max
Tst
ON
Tst+ΔT
OFF
min
Tst Tst

Tst-ΔT

f min f
nom
f
max Frequency

Figure 5.4 Frequency based thermostat control

A smart thermostat that changes temperature setting with change in frequency is

proposed in this chapter. Figure 5.4 shows the variation of Tst with frequency and real-
time price. Within the range {fmin, fnom}, as frequency falls, real-time price rises and so
does the thermostat setting Tst; and as frequency rises, real-time price falls and so does the
Tst. The change in thermostat setting can either be done on the basis of real-time price
deviations or the grid frequency deviations. Only the latter option has been considered in
this work. The change in thermostat setting with the frequency causes change in the on-
off cycle of thermostat thereby reducing the power demand during frequency dips. The
variation of thermostat setting is limited to within the range {fmin, fnom} only. In the range
{fnom, fmax}, there should be no change in Tst, as it would be undesirable to increase
consumption of thermal loads just to control the frequency rise. This control has been
termed as Frequency Based Thermostat Control (FBTC). The FBTC controls the
consumption of energy in air-conditioning loads intelligently by varying the thermostat
setting according to prevailing frequency conditions. The temperature band
{Tstmin,Tstmax}in which the thermostat setting is varied can be utilized as a thermal storage
medium, and therefore an indirect electricity storage method. If Kwi is the rating of the air
conditioner, the power demand due to air conditioner under FBTC, Pfbtci is given by (5.4).
Pfbtci = K wi w fbtci (5.4)

Again assuming normal distribution of parameters Tg, τ and Tf., the overall demand of a
group of N air-conditioners is given by (5.5).
Chapter 5 96

N
Pfbtc = ∑ Pfbtci (5.5)
i =1

The effect of this smart controller will be that all thermal loads connected to grid are able
to stabilize the drop in grid frequency by decreasing their net demand. Where net
decrease in demand due to DDC is given by (5.6).
ΔPdf = Pstc − Pfbtc (5.6)

There are two options for practical implementation of DDC on a large scale. First
one is to charge the consumer at real-time price so that the benefits of demand reduction
are directly passed to the consumer actually connected to the grid during frequency
excursions. In this case, consumers will have price based thermostat control on their air
conditioning load, which can be adjusted by them according to their price-comfort
preferences. This option would requires
(a) An appropriate retail market mechanism to facilitate price based actions of
consumers.
(b) AMIs to record consumer’s usage as well as to interface with Disco’s billing
system.
Since the retail markets are not fully developed yet and penetration of AMI is not so deep,
second option is considered. In this option, the consumers install a FBTC on their air
conditioners in return for some incentive from the Disco. This type of DDC, as shown in
Figure 5.4, would vary the thermostat setting between Tstmin and Tstmax pre-decided by the
Disco. The Discos make an estimate of the gains from DDC and decide about a suitable
incentive to be given to the consumer. Actual measurement of demand response obtained
due to DDC using this option would be very difficult due to various uncertainties. Offline
simulations based on physically based models can help Discos in getting an estimate of
their savings from DDC.

5.4 Dynamic demand control in real-time market

To emulate the impact of DDC in real-time markets, a price based AGC model of
isolated area system, considered in Chapter 4, is taken again. The generation control part
of this model has already been explained in Section 4.4. Let us consider the area to have
four Discos as shown in Figure 5.5. ΔPdi represents the load change due to ith Disco. Di
represents the load frequency responses characteristics of ith Disco. ΔPdfi represents the
load reduction achieved by implementing DDC on the air conditioning load under ith
Disco’s domain. Hence the resultant demand changes in Disco i, ΔPdri can be attributed to
Chapter 5 97

three factors: the naturally occurring load fluctuations, load frequency response
characteristics and DDC. This relation can be presented by (5.7).
ΔPdri = ΔPdi + Di Δf + ΔPdfi (5.7)

The block represented by DDC represents the load reduction due to group of N air
conditioners implementing FBTC.

Disco 1
+
ΔPdf1 DDC 1
Genco ΔPg1 ΔPdr1
+ D1
1
+ ΔPd1

Disco 2 Δf
ΔPg2 +
ΔPdf2 DDC 2
Genco
ΔPdr2
2 D2
+

+ ΔPd2
Δf
ΔPg3 Disco 3
Genco +
ΔPdf3 DDC 3
3 ΔPdr3
+ D3

+ ΔPd3

Disco 4
ΔPg4 +
ΔPdf4 DDC 4
Genco ΔPdr4
4 + D4

+ ΔPd4

+ + + + - - - -

1
Ms

Δf

Figure 5.5 Price based AGC model of test system incorporating DDC

5.5 Case Studies

The overall impact of DDC on frequency and real time prices is studied by simulating
some example systems using Matlab/Simulink [139]. The simulations are carried in
following steps:
Chapter 5 98

(a) Control of a single air-conditioning load

(b) Control of a group of air-conditioning load.
(c) Control in real-time markets.

5.5.1 Single AC Load

In this sub-section, model of a thermostatically controlled air-conditioning load in a
house, as shown in Figure 5.1, is simulated. The simulation has been run for three hours
(i.e.10800 s). The ambient room temperature Tf is taken as 35 °C. Temperature gain Tg is
taken as 20 and time constant τ is taken as 900 s. During this period, the assumed
variation of frequency and consequent variation thermostat setting Tst is shown in Figure
5.6. The objective of the simulation is to predict the advantages of proposed control in a
situation of demand-supply imbalance, resulting in frequency deviation. A comparison
between an air conditioner on STC and on FBTC is drawn. Figure 5.7(a) shows the room
temperature during simulation for STC and Figure 5.7(b) shows room temperature for
FBTC. The change in thermostat setting in the latter case alters the on-off cycle of air
conditioner. The difference in energy consumed can be analysed by integrating the power
consumption of air conditioner over a period of time. The rating of the air conditioner in
this example is taken as 2 kW. The energy consumed by the air-conditioner during each
hour for both cases is analysed and results are given in Table 5.1.

50.1 31
Frequency Thermostat Setting

49.9 29

49.7 27
Frequency (in Hz)

Tst (in °C)

49.5 25

49.3 23

49.1 21

48.9 19
0 1800 3600 5400 7200 9000 10800
Time (in s)

Figure 5.6 Frequency and Tst vs. time

Chapter 5 99

(a)
Room Temperatue
35 Ambient temeperature
Upper Thermostat Limit
Lower Thermostat Limit

Temperature (in °C)

30

25

20
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
Time (in s)

(b)
35
Temperature (in °C)

30

25

20
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
Time (in s)

Figure 5.7 Temperature variation (a) with STC (b) with FBTC
From these results, it is evident that an air-conditioner with FBTC consumes less
energy as compared to the one with STC during a frequency dip. In this example, the
frequency dip start at the middle of first hour, the major part of dip occurs during the
second hour, and frequency is resurrected during the third hour. Observing the energy
consumed during individual hours from Table 5.1, we can say that the major saving due
to FBTC comes during the second hour. During the third hour, FBTC is consuming more
as compared to STC. This can be attributed to the rebound effect of thermal loads i.e.
some energy consumption was shifted from second to third hour. However, this effect is
not as significant to wipe off the overall gains made by FBTC during the simulated
period.
Table 5.1 Energy Consumed by Air-Conditioner
Hour STC FBTC % saving due to FBTC
1 1.2357 1.0807 12.54%
2 1.1586 0.6637 42.72%
3 1.1822 1.2628 -6.82%
Total 3.5766 3.0072 15.92%
Chapter 5 100

5.5.2 Group AC Load

To analyse the behaviour of a group of air-conditioning load Monte-Carlo simulation
technique as described in [130] is applied. A group of 500 air-conditioners is considered
where each air-conditioner is assumed to have an average rating of 2 kW. The
uncertainties in the system are taken into account by assuming normal distribution of
parameters Tg, τ and Tf. Mean value of Tg is taken as 20 with a standard deviation of 2.
Mean value of τ is taken a 1000 s with a standard deviation of 100 s. The initial internal
temperature is normally distributed over the range 21°C to 35 °C. The power
consumption of these 500 air-conditioners is aggregated as given by (5.3) in case of STC
and (5.5) in case of FBTC. The simulation is run for 10800 s (3 hours). The frequency
and Tst variations are assumed to be same as shown in Figure 5.6. The net power demand
for a group of 500 air-conditioners is plotted in Figure 5.8 for STC as well as FBTC.

1000
STC
900 FBTC

800

700
Demand (in kW)

600

500

400

300

200

100

0
0 1800 3600 5400 7200 9000 10800
Time (in s)

Figure 5.8 Demand of a group of air-conditioners

Figure 5.8 shows that a net reduction in demand is obtained by employing FBTC
during the frequency dip starting from 1800s and ending at 7200s. A frequency based
load reduction signal ΔPdf can be derived by taking the difference of two signals plotted
in Figure 5.8. This load reduction can be helpful in reducing the frequency deviation itself
as well as the real-time price of demand deviations. This model of aggregate air
conditioning load is used in the next section to analyse the impact of presence of a
frequency based dynamic load control on the real-time markets.
Chapter 5 101

5.5.3 DDC in Real-Time Market

In order to illustrate the impact of load reduction from FBTC on the real-time market,
only peak-load hour condition, as described in Section 4.5.2, has been considered. The
scheduled system load during this hour is 4700 MW and market clearing price is 5250
INR/MWh. All Gencos except G4 are loaded to their maximum rating.
The load due to each Disco has been assumed to be equal and 20% of this peak-
load, i.e. 235 MW in each Disco, has been attributed to the air-conditioning load.
Therefore, 235 MW in each Disco can be subjected to the FBTC proposed in this chapter.
The methodology adopted for estimating load reduction due to group of air-conditioning
loads, explained in Section 5.5.2, has been utilized for estimating load reduction of
Discos due to FBTC. Estimating the load reduction in 235 MW air-conditioning load due
to FBTC implies that a group of 117500 air conditioners (assuming each air conditioner
to be of 2kW rating) has to be simulated. In order to reduce the computation time, clusters
of 1175 air conditioners have been formed, and within these clusters, air conditioners
were assumed to have to similar ambient temperature, thermal gain, and time constant.
Then 100 clusters were subject to randomly generated Tg, τ and Tf parameters.
applied Δ Pd Δ Pd without FBTC ΔPd with FBTC
250 300

200
200
Δ Pd1 in MW

Δ Pd2 in MW

150
100
100

0
50

0 -100
0 1000 2000 3000 0 1000 2000 3000
time in s time in s

200 250

200
150
150
Δ Pd3 in MW

Δ Pd4 in MW

100
100
50
50
0
0

-50 -50
0 1000 2000 3000 0 1000 2000 3000
time in s time in s

Figure 5.9 Load Reduction with and without FBTC

Chapter 5 102

The test system has been simulated for two cases

(a) without employing FBTC
(b) with FBTC modelling.
The applied load change signals ΔPdi have been generated randomly for each
Disco, representing the naturally occurring load variations in them, and are shown by blue
plots in Figure 5.9. The variation of frequency and real-time price during both simulations
are shown in Figure 5.10. It has been observed that when there is no FBTC, the system
experiences a drastic fall in frequency with the increase in load. At one point of time, the
frequency drops to as low as 49.2 Hz. The load reduction in this case is attributed to load
frequency response characteristics. The net load change ΔPdri for this case is shown by
green plots in Figure 5.9. The real-time price rises corresponding to the drop in
frequency.
When FBTC model is employed, the air-conditioning part of the load responds to
drop in frequency. However the drop in frequency is not very severe and the frequency
remains close to 49.9 Hz. The load change in this case is shown by the red plots in Figure
5.9. As the frequency drop is very low, the load change due to load frequency response
characteristics is very small. This implies that the load change in this case is mainly due
to the FBTC employed in air-conditioning load. Another observation from Figure 5.9 is
that the load change with FBTC plots almost follows the load change without FBTC
plots. This shows that the proposed FBTC model is responding in desirable manner. The
main advantage of employing FBTC is that it is able to produce drop in loads of Disco
without allowing the frequency to fall drastically to a low value.
Apart from benefiting the grid by reducing the frequency drop, FBTC also helps
to reduce the real-time price. This implies that the payments made by Disco for their UI
energy consumption will be reduced. As discussed in Chapter 4, payments in the real-
time market are best to be calculated over a time interval of five minutes. For one hour
simulation of real-time market, there will be a set of 12 real-time prices corresponding to
each interval of 5 minutes. Table 5.2 lists the average frequency and real-time price for
each time-interval of five minutes duration. For sake of comparison, results with and
without employing FBTC have been listed. The improvement in average frequency and
corresponding real-time price due to FBTC during each interval is clearly visible from the
table.
Chapter 5 103

50

49.8

Frequency in Hz
49.6

49.4
without FBTC
49.2 with FBTC

49
0 500 1000 1500 2000 2500 3000 3500
time in s

10000

without FBTC
9000
with FBTC
ρ in INR/MWh

8000

7000

6000

5000
0 500 1000 1500 2000 2500 3000 3500
time in s

Figure 5.10 Change Frequency and Real-time price due to FBTC

Table 5.2 Frequency and real-time price for each time-interval of 5 minutes
Time Frequency (in Hz) Real-time Price (in INR/MWh)
Interval without FBTC with FBTC without FBTC with FBTC
1 49.88 49.91 5918.90 5787.70
2 49.89 49.89 5904.70 5904.00
3 49.88 49.89 5954.30 5878.80
4 49.86 49.89 6075.70 5868.70
5 49.76 49.89 6631.60 5899.10
6 49.65 49.89 7283.00 5912.10
7 49.55 49.88 7855.90 5922.10
8 49.47 49.88 8322.40 5942.90
9 49.38 49.88 8836.00 5969.50
10 49.31 49.87 9225.20 5983.70
11 49.28 49.87 9452.70 5987.40
12 49.26 49.86 9559.50 6040.90
Chapter 5 104

Table 5.3 UI of each Disco for each time-interval of 5 minutes duration

Time UI of D1 UI of D2 UI of D3 UI of D4 Total UI (in
Interval (in MWh) (in MWh) (in MWh) (in MWh) MWh)
with without with without with without with without with without
FBTC FBTC FBTC FBTC FBTC FBTC FBTC FBTC FBTC FBTC
1 6.75 5.50 7.86 6.78 1.43 0.37 4.03 3.23 20.07 15.87
2 7.82 7.72 7.75 7.77 2.58 2.58 3.48 3.52 21.63 21.60
3 8.83 8.63 7.57 7.35 3.87 2.75 3.10 2.29 23.37 21.02
4 9.64 8.43 7.21 5.71 5.13 4.98 2.78 1.57 24.76 20.68
5 10.04 9.22 6.48 5.47 6.14 5.11 2.35 1.65 25.01 21.45
6 10.24 9.19 5.66 5.48 7.08 6.33 2.05 1.05 25.03 22.06
7 10.28 9.89 4.81 3.83 7.99 7.27 1.95 1.42 25.03 22.41
8 10.18 9.54 3.98 4.09 8.82 7.86 2.05 1.51 25.03 23.00
9 9.92 9.67 3.19 2.30 9.56 9.23 2.35 2.70 25.01 23.90
10 9.54 8.76 2.48 2.28 10.18 10.93 2.85 2.45 25.04 24.43
11 9.02 8.87 1.85 1.89 10.63 9.87 3.50 3.87 24.99 24.50
12 8.40 9.09 1.35 1.42 10.94 11.36 4.32 3.13 25.01 25.00
Chapter 5 105

Table 5.4 Payments by each Disco for each time-interval of 5 minutes duration
Time Payment by D1 Payment by D2 Payment by D3 Payment by D4 Total Payment
Interval (in INR) (in INR) (in INR) (in INR) (in INR)
with without with without with without with without with without
FBTC FBTC FBTC FBTC FBTC FBTC FBTC FBTC FBTC FBTC
1 39,978.80 31,811.53 46,512.84 39,220.84 8,479.77 2,142.87 23,831.59 18,679.34 118,803.00 91,854.58
2 46,147.45 45,591.90 45,787.30 45,883.28 15,248.72 15,260.95 20,561.24 20,779.00 127,744.71 127,515.12
3 52,563.15 50,714.95 45,100.79 43,205.55 23,038.10 16,187.63 18,470.51 13,462.82 139,172.56 123,570.95
4 58,571.19 49,460.50 43,803.01 33,490.04 31,177.47 29,197.95 16,913.40 9,241.99 150,465.07 121,390.48
5 66,556.14 54,365.25 43,003.97 32,294.75 40,699.08 30,148.19 15,591.16 9,719.11 165,850.35 126,527.30
6 74,547.85 54,306.43 41,220.86 32,426.97 51,597.14 37,451.88 14,954.28 6,210.33 182,320.12 130,395.60
7 80,756.50 58,544.29 37,800.91 22,695.00 62,751.76 43,060.34 15,308.17 8,395.23 196,617.34 132,694.86
8 84,682.33 56,693.78 33,119.45 24,330.64 73,436.46 46,684.78 17,059.17 8,990.28 208,297.40 136,699.48
9 87,648.86 57,733.16 28,151.47 13,742.39 84,442.98 55,093.90 20,734.05 16,130.14 220,977.36 142,699.58
10 87,994.59 52,421.62 22,844.05 13,672.85 93,884.84 65,428.95 26,249.73 14,666.02 230,973.21 146,189.44
11 85,220.62 53,093.52 17,441.23 11,286.17 100,507.50 59,123.15 33,069.21 23,194.48 236,238.55 146,697.33
12 80,335.31 54,891.78 12,902.51 8,577.70 104,603.18 68,620.51 41,269.32 18,915.75 239,110.31 151,005.74
Chapter 5 106

Table 5.3 lists the UI energy consumption in MWh of each Disco for each time-interval
of five minutes duration. This table reveals that UI energy consumption also reduces due
to FBTC. Overall reduction in UI energy consumption has been observed as 8.26 %.
Table 5.4 shows the payments made by each Disco for each time-interval of five minutes
duration. These payments have been calculated by multiplying the UI energy
consumption during each interval to the corresponding real-time price. Table 5.5
summarizes the payments made by each Disco with and without employing FBTC. This
table shows that there are considerable savings of Discos with the use of FBTC.
Table 5.5 Savings of Discos due to FBTC
Discos Payment without FBTC Payment with FBTC Saving Saving
(in INR) (in INR) (in INR) (in %age)
D1 845,002.80 619,628.72 225,374.08 26.67
D2 417,688.38 320,826.17 96,862.21 23.19
D3 689,867.00 468,401.09 221,465.91 32.10
D4 264,011.81 168,384.49 95,627.32 36.22

5.6 Conclusions
This chapter proposes a mechanism of achieving real-time demand response through
dynamic demand control by utilizing frequency based real-time pricing. A real-time
price/frequency based load control for air conditioning load is simulated. This control
changes the thermostat setting of air-conditioner in response to the changes in system
frequency. Physically based load models of air conditioning loads are used to extract load
reduction achieved with the exercise of this control. The result of simulation on a single
air conditioner show that significant reduction in energy consumption can be achieved
during frequency dips. The results of simulation in an example of a real-time market with
four Gencos and four Discos show that such load control not only results in better
frequency control but also lower the real-time price of energy. The savings occurring to
the load serving entities are significant as payments made by them to the SO for UI
energy are considerably reduced due to proposed dynamic control of air conditioning
load.
Chapter 6 107

Chapter 6

Operation and Control of BESS in Real-

Time Market with High Wind Penetration
6.1 Introduction
Recently, many countries have been pushing for a higher share of renewable energy
sources, especially wind, in their generation mix. However, the intermittent and uncertain
nature of wind power imposes a limit on the extent it can replace the conventional
generation resources. In a high wind penetration scenario, the Battery Energy Storage
System (BESS) offers a solution to the grid operation problems. In this chapter, we
evaluate the merit of the real-time frequency-linked prices, proposed in Chapter 4, for
operation of BESS in a real-time market with high wind penetration. We have presented a
model for real-time price-based operation of a BESS. Simulations for different wind
penetration scenarios are carried out on an isolated area test system. Wind speed sequence
is generated using composite wind speed model. A simplified model of wind speed to
power conversion is adopted to observe the impact of increase in Wind Power Generation
(WPG) on the grid frequency and the real-time prices.
The result of simulations show that BESS not only helps in dealing with
uncertainty in wind power forecasts, but also reduces the fluctuations in frequency due to
wind power’s intermittency. Price-based operation of BESS results in higher operating
revenues by discharging at peak prices and reduces operating costs by charging at
minimum prices. Ultimately, the study helps in achieving the societal goal of replacing
fossil fuel generation by environment friendly generation and reducing green house gas
emissions.

6.2 Wind Integration Model

In this chapter, a flexible approach for modelling wind speeds has been adopted, which
makes it possible to simulate a wind speed sequence with desired characteristics. Wind
speed is assumed to be composed of following four components:
Chapter 6 108

(i) average wind speed (vwa)

(ii) wind speed ramp (vwr)
(iii) wind gust (vwg)
(iv) wind turbulence (vwt)
The resultant wind speed, vw is given by (6.1)
vw ( t ) = vwa + vwr ( t ) + vwg ( t ) + vwt ( t ) (6.1)

This wind speed model is known as composite wind model, which was originally
proposed in [131], [132]. The equations pertaining to calculation of various wind speed
components can also be found in [133]. In this work, we have simulated real-time
conditions for a time duration of one hour. Therefore, in our case, vwa represents the
hourly average wind speed, in contrast to the three or five minute average speeds taken in
other applications. Additionally, the model is modified to accommodate multiple wind
ramps and wind gusts occurring at different starting and ending times.
The wind speed ramp is characterized by three parameters- amplitude of wind
speed ramp (Ar), starting time of wind speed ramp (Tsr), and end time of wind speed ramp
(Ter). vwr is described by (6.2).
vwr ( t ) = 0 ∀t < Tsr
= Awr ( t − Tsr ) / (Ter − Tsr ) ∀Tsr ≤ t ≤ Ter (6.2)
= Awr ∀t > Ter

Wind speed gust is characterized by three parameters- amplitude of wind speed

gust (Ag), starting time of wind speed gust (Tsg), and end time of wind speed gust (Teg).
vwg is described by (6.3)
vwg ( t ) = 0 ∀t < Tsg
{ }
= Awg 1 − cos ⎡⎣ 2π ( t − Tsg ) / (Teg − Tsg ) ⎤⎦ ∀Tsg ≤ t ≤ Teg (6.3)
=0 ∀t > Teg

The turbulence component of wind speed is characterized by a power spectral

density equation given by (6.4)
1
.l.vwa
ln ( h / z0 )
2

PDt ( f ) = 5/ 3
(6.4)
⎛ f .l ⎞
⎜1 + 1.5 ⎟
⎝ vwa ⎠

Where f is the frequency, h is height of turbine shaft, l is the turbulence length

scale which equals 20.h if h is less than 30 m and 600 if h is more than 30 m, and z0 is the
Chapter 6 109

roughness length. Roughness length depends on the structure of landscape surrounding

the wind turbine.
The high speed wind fluctuations are very local and therefore even out over the
rotor surface, particularly when the turbines become larger. To approximate this effect a
low pass filter is introduced in the wind power conversion model. The filtered wind speed
vw’ is given by (6.5)
1
vw ' = vw (6.5)
1 + sTw
The value of time constant Tw depends on the rotor diameter as well as the
turbulence intensity of wind and the average wind speed. The power extracted from a
wind turbine, Pw can be modelled using (6.6).
ρ air
Pw = cP ( λ , β ) π r 2vw3 (6.6)
2
where cP is the power coefficient of wind turbine, λ is the tip speed ratio, β is the
rotor blade pitch angle, ρair is the air density and r is the rotor radius. The tip speed ratio λ
is defined by (6.7).
ωT r
λ= (6.7)
vw

1.5
Power in MW

0.5

0
0 5 10 15 20 25
Wind Velocity in m/s

Figure 6.1 A typical 2 MW wind turbine power curve

In (6.7), ωT is the rotational speed of turbine. The calculation of power coefficient,
cP requires knowledge of aerodynamics of the wind turbine and is usually manufacturer’s
propriety data. If constant torque is assumed, any change in speed will result in change in
captured aerodynamic power. However, if constant power is assumed, cP remains
constant for any change in shaft speed. This is achieved by using pitch angle controller. In
practice, the relation between wind turbine power production and wind speed for each
wind turbine type is given by a power curve, as shown in Figure 6.1(b), which is a set of
Chapter 6 110

experimentally obtained values available from the manufacturer. The overall model for
wind turbine generator is shown in Figure 6.2.

Wind Speed Δvw 1 Δvw’ Wind Power ΔPw

Model 1+Tws Curve

Figure 6.2 Wind power generation model

The rotor has been modelled as a lumped mass and the shaft dynamics are
neglected. Assuming that the generator torque set points can be reached instantaneously
by injecting the appropriate rotor and stator currents [133], the only equation required for
modelling the generator and the converter is the equation of motion. Since the inertia of
wind turbine generators is less when compared to the inertia of thermal generators, the
replacement of conventional thermal generation by WPG will imply a reduction in overall
system inertia M. In order to correctly model the impact of increase in wind generation
capacity of a system on its frequency, its inertia constant should be reduced appropriately
to M′ .

6.3 Battery Energy Storage System (BESS) Model

It has been established that dynamic model of a lead-acid battery is highly non-linear.
Had the model been linear, it could have simply been represented by an ideal voltage
source in series with a constant internal resistance. A commonly used battery model is
Thevenin model, consisting of ideal no-load battery voltage, series internal resistance in
series with a parallel combination of over-voltage resistance and capacitance. Several
LFC and stability studies involving BESS have combined the converter characteristics
and battery equivalent circuits to construct a dynamic model of BESS [134], [135].
Recently, more realistic models of lead-acid batteries have been proposed, taking
into account the non-linear behaviour of internal elements and their dependence on
battery State of Charge (SOC) and electrolyte temperature [136]. These models are
characterized by battery internal resistance, over-charging resistance and separate
charging and discharging process. The empirical relations given in these models are for
low levels of charge/discharge currents and their applicability to large scale BESS is not
proven. Hence, we have used a relatively simple model in this thesis to represent
charge/discharge process and the SOC of BESS. The SOC of BESS should be kept within
Chapter 6 111

proper limits as it is not desirable to deplete or overcharge the BESS [65]. The BESS
controller must get accurate information regarding its SOC.
In this section, a model for price-based control of BESS has been framed. This
device has a very high installation cost but relatively low operating cost. This makes it
uncompetitive for selling energy in the open market. However, BESS is a multifunctional
device. For demand side applications, it has the capability to shift peak load to non-peak
hours. For wind power plants, it has capability to shift off-peak surplus generation to peak
hours. Apart from these applications, it can also provide host of ancillary services to the
system operator (SO) e.g. frequency control, voltage control, black start capability etc.
Most of the previous works reported on BESS emphasize reducing its size, keeping in
mind only the concerned application. However, assuming that the fixed cost of the BESS
is shared by all beneficiaries of its services, we can operate BESS purely on its operating
costs.
INR
/MWh csell

bsell

cbuy bbuy

charging discharging Pb
(MW)
Figure 6.3 Selling and Buying Marginal Price Curves of BESS
The BESS operates in the real-time market based on the marginal price curves
shown in Figure 6.3. It adjusts the coefficients of these curves (bsell csell, bbuy, cbuy) to
maximize the revenues from real-time operation. When the BESS is discharging its
marginal price setting are given by (6.8).
γ = csell Pb + bsell (6.8)

Where Pb is the power output/consumption of BESS When the BESS is charging, the
value of Pb is taken as negative and its marginal price setting are given by (6.9).
γ = cbuy Pb + bbuy (6.9)
Chapter 6 112

The dynamic model of price-based BESS operation in real-time market is shown

in the Figure 6.4. The change in power output of BESS ΔPb is the integral of difference
between the change in real-time price, Δρ and change in marginal price Δγ as given by
(6.10)
Kb
ΔPb = [ Δρ − Δγ ] (6.10)
s
The ‘BESS Control’ block shown in Figure 6.4 decides the state of BESS by changing the
marginal price setting. Depending on the real-time price ρ and the current SOC (control
signals shown by dashed lines), BESS can be in any of these three states: ‘charge’,
‘discharge’ or ‘no action’. It is in ‘discharge’ state when the real-time price is above bsell
and SOC is more than its lower limit SOCL. The rate of discharging of BESS in this state
depends on the coefficient csell and change in its marginal price setting is given by (6.11).
Δγ = csell ΔPb + bsell − Λ (6.11)

It is in ‘charge’ state when the real-time price is below bbuy and SOC is less than its upper
limit SOCU. The rate of charging of BESS in this state depends on the coefficient cbuy and
change in its marginal price setting is given by (6.12).
Δγ = cbuy ΔPb + bbuy − Λ (6.12)

where Λ is the market clearing price. If either the real-time price is between bbuy and bsell
or the SOC limits of the BESS are violated, the BESS is ‘no action’ state and its marginal
price setting is given by (6.13)
Δγ = Δρ (6.13)
The change in SOC of BESS is computed using (6.14) assuming Wb to be the battery
capacity.
⎛ 1 ⎞ ΔPb
ΔSOC = ⎜ ⎟ (6.14)
⎝ 3600Wb ⎠ s

Δρ Kb ΔPb
Δf -Kr s

Δγ BESS
Control

1 1
3600Wb s
Δρ ΔSOC
Figure 6.4 Price-based Control of BESS with SOC limits imposed
Chapter 6 113

6.4 Real-time Market with WPG and BESS

The real-time market model proposed in Chapter 4 with four Gencos is considered again.
We add the models of WPG described in Section 6.2 and BESS described in Section 6.3
to this model. The real-time market model is shown in Figure 6.5 and is simulated using
MATLAB/Simulink.
Genco ΔPg1
1

Genco ΔPg2
2

ΔPg3 ΔPw
Genco
3 WPG
Δf

Genco ΔPg4
4 ΔPd

ΔPb
BESS
ΔPdr

+ + + + + + −

1
M′ s

Δf

Figure 6.5 Price based AGC model of test system including WPG and BESS

6.5 Case Studies

Consider an isolated area test system having a capacity of 5000 MW supplied by four
Gencos. The capacity and cost data related to these Gencos is given in Table 6.1. The
system inertia parameter M is taken as 1000 MWs/Hz and load frequency response
parameter D is taken as 200 MW/Hz. The slope of price frequency curve Kr is taken as
6200 INR /Hz. The test system has been modelled using Matlab/Simulink [139] and
Chapter 6 114

analysed under diverse loading conditions. A normal load condition is represented by a

load of 2950 MW and MCP of 3100 INR/MWh.
Table 6.1 Genco data
Parameter Gencos
1 2 3 4
b in INR/MWh 800 1600 2400 3600
2
c in INR/MWh 1 1.5 2 2.5
Pgmax in MW 1500 1500 1000 1000
Pgmax (4% WP) in MW 1500 1500 900 900
Pgmax (20% WP) in MW 1300 1300 700 700

6.5.1 Impact of increasing wind penetration

Initially, the system is simulated under normal loading conditions without any WPG.
Later, 4% of conventional generation capacity (i.e. 200MW) is replaced with WPG.
Subsequently, the penetration of wind power in the system is increased to 20% (i.e. 1000
MW). Assuming the inertia constant of wind turbine generator to be 60 per cent of
conventional thermal generator, the system inertia is reduced to 984 MWs/Hz for the 4%
penetration of wind power and 920 MWs/Hz for 20% penetration of wind power. The
model described in Section 6.2 is used to simulate the wind speed to power conversion in
the wind turbine generators. In both (4% WPG and 20% WPG) cases, the average wind
speed during the simulation hour is assumed to be 9.5 m/s. Taking the power curve data
given in Table 6.2 as a benchmark, the average power output from wind sources in the
4% WPG case should be 105 MW and in 20 % WPG case should be 515 MW. The
composite wind speed model described in Section 6.2 is utilized to generate the wind
speed sequence for complete one hour of simulation. Data related to wind ramps, gusts,
and turbulence components during this hour is given in Table 6.3, Table 6.4 and Table 6.5
respectively. The plot of WPG output for 4% and 20% cases, due to the applied wind
speed sequence, is shown in Figure 6.6.
Table 6.2 Power curve data
vw
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
(in m/s)
Pw
0 0 0 39 117 222 340 550 790 1078 1365 1640 1891 2000 2000 2000
(in kW)
Chapter 6 115

Table 6.3 Wind speed ramp data

Tsr
starting time 0 151 301 601 901 1201 1601 1701 2101 2401 2501 2801 3001 3301
(in s)
Ter
ending time 150 300 600 900 1200 1600 1700 2100 2400 2500 2800 3000 3301 3601
(in s)
Awr
amplitude 0.5 1.0 -1.0 -0.5 1.0 0.5 -0.5 -1 -0.25 0.75 1.0 0.25 -0.75 0.5
(in m/s)

Table 6.4 Wind speed gust data

Tsg
starting time 10 125 505 1075 2455 2595 2700 3110
(in s)
Teg
ending time 25 135 515 1095 2470 2610 2720 3125
(in s)
Awg
amplitude 1.0 1.5 1.0 0.75 1.0 0.5 0.5 1.0
(in m/s)

Table 6.5 Wind turbulence data

f
50
(in Hz)
H
50
(in m)
Z0
0.01
(in m)
τ
4
(in s)

In this section, only the intermittent nature of wind has been modelled, however
the uncertainty in wind speed forecasts has not been taken into account. The actual
average wind speed during the simulation hour is taken same as forecasted speed. It is
assumed that the day-ahead market does not take any bids from wind generators. Since,
the SO includes the expected WPG in the dispatch on ‘as available’ basis, the MCP in the
day ahead market and scheduled loading of Gencos with conventional generation
changes when 4% WPG and 20 % WPG is assumed. The scheduled generation of
conventional plants and the MCP for all cases are shown in Table 6.6. Load perturbations
are modelled by adding a step signal to a random Gaussian noise of mean zero and 10
MW variance. The step signal applied in each case is also shown in Table 6.6. For the 4%
Chapter 6 116

and 20% WPG cases, the amount of load, as expected by the SO, to be supplied by wind
power appears as step load change in the simulation.

800
4% wind power
600
Δ Pw in MW

400

200

0
0 500 1000 1500 2000 2500 3000 3500
time in sec

800

600
Δ Pw in MW

400

200
20% wind power

0
0 500 1000 1500 2000 2500 3000 3500
time in sec

Figure 6.6 Wind power output plots due to applied wind speed sequence

3200
no wind power
50.05 3000
Frequency in Hz

ρ in INR/MWh

50 2800

49.95 2600
no wind power
49.9 2400
0 500 1000 1500 2000 2500 3000 3500 0 500 1000 1500 2000 2500 3000 3500

3200
4% wind power
50.05 3000
Frequency in Hz

ρ in INR/MWh

50 2800

49.95 2600
4% wind power
49.9 2400
0 500 1000 1500 2000 2500 3000 3500 0 500 1000 1500 2000 2500 3000 3500
time in sec

3200
20% wind power
50.05 3000
Frequency in Hz

ρ in INR/MWh

50 2800

49.95 2600

20% wind power

49.9 2400
0 500 1000 1500 2000 2500 3000 3500 0 500 1000 1500 2000 2500 3000 3500
time in sec time in sec

Figure 6.7 Impact of increasing wind power in generation mix

Chapter 6 117

Table 6.6 Simulation data for impact of increasing wind penetration

Cases Pg0 in MW Λ M′ ΔPd
1 2 3 4 in INR/MWh in MWs/Hz in MW
No wind 1500 1000 350 0 3100 1000 0
4% wind 1500 940 305 0 3010 984 105
20% wind 1300 820 215 0 2830 920 515

Figure 6.7 shows the impact of increasing wind penetration in the system on the
grid frequency and real time price. As the share of WPG is increased from 0 to 4%, the
fluctuations in grid frequency increase and vary between 49.99 Hz and 50.01 Hz. When
the share of WPG is further increased to 20%, the grid frequency fluctuates between
49.95 Hz and 50.05 Hz. Similar behaviour is also observed in the real time price plots.
The intermittent nature of WPG increases the frequency fluctuations and the challenge of
regulating the frequency with increasing wind penetration is enormous.

6.5.2 Impact of BESS operation

The scheduling decisions of the SO are usually based on wind power forecast made 12-36
hour before the actual dispatch. The errors in this forecast, which may be as high as 60%,
will certainly be detrimental to frequency regulation in the real time market. However, in
the proposed real-time market, the change in real-time price corresponding to change in
frequency gives an incentive to other generators and demands to take appropriate action.
As discussed in Chapter 4, the action of generators and load in response to the real-time
price, results in self regulation of frequency. The frequency will stay in a close range
around nominal value. However, if the system is severely constrained, the frequency
might move beyond the prescribed limits threatening system security. We consider two
scenarios of extreme conditions. The system might be severely constrained during the
peak load hours, especially when there are no reserves to meet further increase in the
demand. There may also be a constraint on system during the off-peak load hours, when
the demand is decreasing and generation cannot be brought down further. The BESS
technology, discussed in Section 6.3, is introduced in the system to deal with these
constraints. BESS normally operate in a cyclic manner, discharging at peak hours and
charging at off-peak hours. In this section, we study the impact of BESS on frequency
regulation. BESS is assumed to operate on real-time price-based controls as discussed in
Chapter 6 118

Section 6.3. The impact of BESS on real-time grid operation is studied by analysing
following scenarios:
A: Peak load scenario. (with 4% Wind Power)
B: Peak load scenario. (with 20% Wind Power)
C: Off peak scenario. (with 4% Wind Power)
D: Off peak scenario. (with 20% Wind Power)
The initial loading of four Gencos and system marginal price for these cases is shown in
Table 6.7.
Table 6.7 Simulation data of various scenarios for impact of BESS operation
Scenarios Pg0 in MW Λ vwa vwa
1 2 3 4 in INR/MWh forecasted actual
in m/s in m/s
A 1500 1500 900 900 5850 14 9.5
B 1300 1300 700 700 5225 14 9.5
C 500 0 0 0 1300 5 9.5
D 500 0 0 0 1300 5 9.5

Peak Load:
Peak loading case typically represents the situation in grid during peak hours. All
available generation capacity is fully loaded and no surplus reserves are available. This
situation is commonly prevalent in high growth rate developing markets like those of
India. This study shows the impact of uncertainty in wind speed as penetration of WPG
increases. The worst case wind forecast error is considered. The forecasted average wind
speed during the simulated hour is taken as 14m/s, whereas actual average wind speed
turns out to be 9.5 m/s. The system expects wind power generators to deliver power at
their full rating. However, they are able to deliver only around 50% of that due to low
wind speed.

Scenario A (with 4% Wind Power): In this scenario, the total system load is 5000 MW.
Conventional generation capacity of 4800 MW is dispatched through market at an MCP
of 5850 INR/MWh. WPG output of 200 MW is expected to provide the rest of the power.
Due to forecast error, average wind power output comes out to be only 105 MW. This
results in a shortage of around 95 MW in real-time. It was observed that in this case the
Chapter 6 119

frequency drops to a range of 49.4-49.8 Hz and the real-time price rises and varies in
range of 9000-13000 INR/MWh, as shown in Figure 6.8 (blue plots).
The variation of real-time price and frequency, after including BESS model, is
shown in Figure 6.8 (red plots).The sell bid of BESS is set at bsell = 6000 INR/MWh and
csell = 10 INR/MWh2. Its capacity is taken as 100 MW/400 MWh. It has been observed
that price-based operation of BESS results in limiting the fall of frequency to well above
49.9 Hz, and lowering the real-time price simultaneously. BESS’s output and its SOC plot
is also shown in Figure 6.8. The maximum SOC limit has been taken as 0.7 and minimum
has been taken as 0.3. At the start of simulation, BESS was assumed to be fully charged.

50.5
w ithout BESS
Frequency in Hz

50 w ith BESS

49.5

49
0 500 1000 1500 2000 2500 3000 3500
time in sec
4
x 10
1.5
w ithout BESS
ρ in INR/MWh

w ith BESS

0.5
0 500 1000 1500 2000 2500 3000 3500
time in sec

200
Δ Pw and Δ Pb in MW

Δ Pw
150
Δ Pb
100

50

0
0 500 1000 1500 2000 2500 3000 3500
time in sec

0.8
SOC of BESS

0.7

0.6

0.5
0 500 1000 1500 2000 2500 3000 3500
time in sec

Figure 6.8 Impact of BESS operation in Scenario A

Chapter 6 120

Scenario B (with 20% Wind Power): In this case a total system load is again taken as
5000 MW. Out of which, 4000 MW is dispatched through Gencos at an MCP of 5275
INR/MWh. Rest of the 1000 MW is expected from the wind sources, which now have a
capacity of 1000 MW. Let us consider a forecast error resulting in average wind
generation of 515 MW. There is a deficit of 485 MW in the system. This results in a low
grid frequency, in a range of 47.0 to 48.5 Hz, as shown in Figure 6.9 (blue plots). This
range of grid frequency is unacceptable and would result in tripping of under-frequency
relays at major load centres and Gencos. This would pose a grave threat to the security of
system. Real-time price in this case has gone up to 20000 to 35000 INR/MWh.

50
w ithout BESS
Frequency in Hz

49 w ith BESS

48

47

46
0 500 1000 1500 2000 2500 3000 3500
time in sec
4
x 10
4
w ithout BESS
ρ in INR/MWh

3 w ith BESS

0
0 500 1000 1500 2000 2500 3000 3500
time in sec

800
Δ Pw and Δ Pb in MW

ΔPw
600
ΔPb
400

200

0
0 500 1000 1500 2000 2500 3000 3500
time in sec

0.7
SOC of BESS

0.65

0.6

0.55

0.5
0 500 1000 1500 2000 2500 3000 3500
time in sec

Figure 6.9 Impact of BESS operation in Scenario B

Chapter 6 121

The variation of real-time price and frequency, after including BESS model, is
shown in Figure 6.9 (red plots). We observe that price-based operation of BESS results in
limiting the frequency fall to above 49.0 Hz. The sell bid of BESS is set at bsell = 8000
INR/MWh and csell = 10 INR/MWh2. The capacity of BESS in this scenario is taken as
400 MW/1600 MWh. Discharge of BESS under these circumstances fetches it a very
high price of 12000 to 14000 INR/MWh from the real-time market.

Off Peak Load:

During the off peak hours, system load is low. In some electric grids, generation cannot
be brought below a certain minimum level due to the presence of must run generation
sources e.g. nuclear power, combined heat and power, and the wind power itself. Some
markets with high penetration of wind, e.g. Texas, Denmark and Germany, have even
witnessed negative prices in their day ahead markets during the off-peak hours. If the
wind power production is higher than forecasted level, the frequency may rise above its
nominal value and threaten the system security. In this study, the impact of adverse wind
forecast on grid operation during the off-peak hours has been analysed. The SO expects
average wind speed during the simulated hour to be 5 m/s. The actual average wind speed
is taken as 9.5 m/s.

Scenario C (with 4% Wind Power): In this case, the total system load has been considered
to be as 500MW. This load is supplied by conventional generation plant at an MCP of
1300 INR/MWh. The average output of wind sources is 105 MW against the expected 5
MW. The frequency climbs to a range of 50.4-50.7 Hz and the real-time price is pushed
in the negative zone of 0 to -800 INR/MWh as shown in Figure 6.10 (blue plots).
The buying bid of BESS is set at bbuy = 1000 INR/MWh and cbuy = 10 INR/MWh2.
Its capacity is assumed to be 100MW/400MWh. The price-based operation of BESS
results in limited frequency rise, as shown in Figure 6.10 (red plots). BESS is not only
charging at cheaper rates, but also helping in system operation by bringing down the
frequency. Its output and SOC plot is also shown in Figure 6.10. At the start of
simulation, BESS was assumed to be at its minimum SOC limit.
Chapter 6 122

50.8
w ithout BESS
Frequency in Hz 50.6 w ith BESS

50.4

50.2

50
0 500 1000 1500 2000 2500 3000 3500
time in sec

2000
w ithout BESS
ρ in INR/MWh

w ith BESS
1000

-1000
0 500 1000 1500 2000 2500 3000 3500
time in sec

200
Δ Pw and Δ Pb in MW

ΔPw
100 ΔPb

-100
0 500 1000 1500 2000 2500 3000 3500
time in sec

0.5
SOC of BESS

0.45

0.4

0.35

0.3
0 500 1000 1500 2000 2500 3000 3500
time in sec

Figure 6.10 Impact of BESS operation in Scenario C

Scenario D (with 20% Wind Power): In this case, the average wind power output is
around 515 MW and the load is again 5000 MW. There is lot of unexpected surplus WPG
in the grid. As a result, the frequency rises to an abnormally high range of 52 to 53 Hz
and real-time price has been pushed down to the negative zone, as shown in Figure 6.11
(blue plots). BESS capacity is assumed to be 400 MW/ 1600 MWh. Its buying bid is set
at bbuy = 0 INR/MWh and cbuy = 5 INR/MWh2. The impact of BESS operation on
frequency and real time price is depicted in Figure 6.11 (red plots). We observe that apart
Chapter 6 123

from restricting the frequency, BESS is charging itself at a negative price of 1000 to 1500
INR/ MWh. This implies that it will be receiving payments for consuming power during
this off-peak scenario. In this way, if the BESSs operate on basis of real-time prices
emanating from the proposed real-time markets, they will not only be maximizing their
own benefit, but also help in maintaining grid frequency.

54
w ithout BESS
Frequency in Hz

53 w ith BESS

52

51

50
0 500 1000 1500 2000 2500 3000 3500
time in sec

5000
w ithout BESS
ρ in INR/MWh

w ith BESS
0

-5000

-10000
0 500 1000 1500 2000 2500 3000 3500
time in sec

1000
Δ Pw and Δ Pb in MW

ΔPw

500 ΔPb

-500
0 500 1000 1500 2000 2500 3000 3500
time in sec

0.5
SOC of BESS

0.45

0.4

0.35

0.3
0 500 1000 1500 2000 2500 3000 3500
time in sec

Figure 6.11 Impact of BESS operation in Scenario D

Chapter 6 124

6.6 Conclusions
A novel mechanism for operating battery energy storage system in real-time market,
having an increasing penetration of wind power, is presented in this chapter. Pricing of
energy in the real-time market is framed on an inverse price-frequency curve that
translates frequency deviation due to demand-supply imbalance into a price deviation.
Simulations carried out on an isolated area test system show the impact of increasing
wind penetration on frequency and real time price due to both high variability and
forecast error. It was observed that increased wind penetration resulted in higher
fluctuations in frequency and real-time price. Worst cases of forecast errors were
simulated and results show that during peak periods, real-time price of energy is
excessively high and during off-peak periods it can be fairly low.
A model for price-based control of BESS is conceived, in which charge and
discharge process is separate and SOC limit is implemented. Results of simulation on an
isolated area example system show that better control of frequency can be achieved using
price-based control of BESS. High real-time price due to wind forecast errors is also
brought down considerably. Price-based operation of BESS delivers higher operating
revenues by selling energy at peak prices and reduces operating costs by buying energy at
minimum prices.
Chapter 7 125

Chapter 7

Impact of FACTS Devices on Spot

Electricity Prices
7.1 Introduction
In this Chapter, the influence of various types of FACTS devices on active and reactive
power marginal prices has been studied with their optimal placement. The static models
of these devices have been incorporated in an OPF formulation with the objective of
maximization of social welfare function along with the cost of these devices. There are
three basic types of FACTS devices, first can be characterized as injection of current in
shunt, the second as injection of voltage in series with the line and the third a combination
of current injection in shunt and voltage injection in series In this Chapter, one device of
each type is considered individually viz. Static VAR Compensator (SVC), Thyristor
Controlled Series Capacitor (TCSC) and Thyristor Controlled Phase Angle Regulator
(TCPAR) and a comparative study of effect of each one of them on both type of marginal
prices is carried out.
The objective function of the OPF problem is to maximize the net social welfare,
which is the difference of consumer’s benefit function and supplier’s cost function. These
functions are directly related to the linear bid curves submitted by suppliers and
consumers. This model accommodates bids not only for active power but also for reactive
power from both suppliers and consumers. The cost of FACTS devices has also been
incorporated in the objective function. A quadratic cost function has been taken for SVC
and TCSC [138]. In the literature, many authors have placed the FACTS devices in the
system on the basis of sensitivity factors which may not provide most suitable location of
controllers during the overloaded conditions. Since the FACTS controllers are very costly
devices, a strategy is required for more suitable placement of FACTS devices for their
best impact on spot electricity prices. In this work, a mixed integer nonlinear
programming (MINLP) based model has been proposed for optimal placement of FACTS
Chapter 7 126

devices and assessing their effect on active and reactive power marginal price. The results
have been obtained for an IEEE 14 bus test system.

7.2 Market Model for Spot Price Determination

There are mainly two types of power trading arrangements in a deregulated market
environment. One is based on bilateral agreements between generating companies and
load serving entities. The price of electricity in such transactions is generally agreed upon
bilaterally or through some market coordinating agency. Second is based on power pools,
where generating companies and load serving entities submit their respective bids
comprising of block energy (in MWh) and block price ($/MWh) for every twenty four
blocks during a day. The bids of suppliers are often directly related to their marginal cost
curves and those of consumers are directly related to their marginal benefit curves. The
pool market operator treats the submitted bids as their true marginal cost and benefit
respectively and uses OPF to maximize the net social welfare. In this chapter, only pool
type of trading is considered for the sake of simplicity.

7.2.1 Supplier Bid Model

ρp ρq

Price (in Price (in

$/MWh) $/MVarh)

1 1
μpg μqg
ρpmin ρqmin

Supply Bid Pg Supply Bid Qg

(in MW) (in MVar)

(a) (b)
Figure 7.1 (a) Active power supply bid curve (b) Reactive power supply bid curve
The linear active power supply functions of the mth generator as shown in Figure 7.1 (a) is
defined as
Pgm ( ρ pm ) = μ pgm ( ρ pm − ρ pm
min
) (7.1)

or
ρ pm = ρ pm
min
+ Pgm μ pgm (7.2)

Where ρpm is the active power supply bid price of mth generator in $/MWh and Pgm is the
active power supply bid quantity of mth generator in MW. ρpmmin and μpgm are constants
Chapter 7 127

indicating the intercept and slope of active power supply bid curve of mth generator . The
mth generator’s cost function C(Pgm) is directly related to its linear supply function.
Pgm

C ( Pgm ) = ∫ρ dPgm = ρ pm Pgm + Pgm 2μ pgm

min 2
pm (7.3)
0

Now let
bpm = ρ pm
min
and c pm = 1 2μ pgm (7.4)

therefore,
C ( Pgm ) = bpm Pgm + c pm Pgm
2
(7.5)

where bpm and cpm are first and second order coefficients of active power cost function of
mth generator.
In a similar way, the reactive power cost functions can also be included in the
model. Though, as suggested in [137] the reactive power supply functions are
discontinuous and must accommodate the lost opportunity cost, but to simplify the
computations linear reactive power supply bids are taken in this work. The linear reactive
power supply functions of the mth generator as shown in Figure 7.1 (b) is defined as
Qgm ( ρ qm ) = μ qgm ( ρ qm − ρ qm
min
) (7.6)

Now let
bqm = ρ qm
min
and cqm = 1 2μ pqm (7.7)

Where ρqm is the reactive power supply bid price of mth generator in $/MVarh and Pgm is
the reactive power supply bid quantity of mth generator in MVar. ρqmmin and μqgm are
constants indicating the intercept and slope of reactive power supply bid curve of mth
generator . Therefore, the mth generator’s reactive power cost function C(Qgm)
C (Qgm ) = bqmQgm + cqmQgm
2
(7.8)

where bqm and cqm are first and second order coefficients of reactive power cost function
of mth generator.

7.2.2 Consumer Bid Model

In deregulated markets the consumer can react to market prices. They can curtail their
consumption at the time of high prices and thus, reduce price spikes. The price
responsiveness of a consumer in electricity market can be expressed by a linear demand
function as shown in Figure 7.2.
Pd ( ρ pn ) = μ pdn ( ρ pn
max
− ρ pn ) (7.9)
Chapter 7 128

ρp ρq

ρpmax ρqmax

Price (in Price (in

$/MWh)
1 $/MVarh)
1
μpd μqd

Demand Bid Pd Demand Bid Qd

(in MW) (in MVar)

(a) (b)
Figure 7.2 (a) Active power supply bid curve (b) Reactive power supply bid curve
or
ρ pn = ρ pn
max
− Pdn μ pdi (7.10)

Where ρpn is the active power demand bid price of nth consumer in $/MWh and Pdn is the
active power demand bid quantity of nth consumer in MW. ρpnmax and μpdn are constants
indicating the intercept and slope of active power demand bid curve of nth consumer .The
nth consumer’s benefit functions B(Pdn) is directly related to its linear demand function.
Pdn

B ( Pdn ) = ∫ρ dPdn = ρ pn Pdm − Pdn2 2μ pdn

max
pn (7.11)
0

Now let,
e pn = ρ pn
max
and f pn = 1 2μ pdn (7.12)

therefore,
B ( Pdn ) = e pn Pdn − f pn Pdn2 (7.13)

where epn and fpn are first and second order coefficients of active power demand function
of nth consumer.
The consumer n with curtailable load submits a load curtailment factor ζ n which
denotes the percentage of dispatchable load of the total power consumption. In these
cases, the dispatchable power consumption Pdc is modelled by the following equations.
0 ≤ Pdcn ≤ ζ n .Pdnmax (7.14)
Hence, the total load for consumer n is
Pdn = (1 − ζ n ) Pdnmax + Pdcn (7.15)

The consumer bid can also be taken for reactive power,

Qdn ( ρ qn ) = μ qdn ( ρ qnmax − ρ qn ) (7.16)
Chapter 7 129

or
ρ qn = ρ qnmax − Qdn μqdi (7.17)

Where ρqn is the reactive power demand bid price of nth consumer in $/MVarh and Qdn is
the reactive power demand bid quantity of nth consumer in MVar. ρqnmax and μqdn are
constants indicating the intercept and slope of reactive power demand bid curve of nth
consumer .
Now let,
eqn = ρ qnmax and f qn = 1 2μqdn (7.18)

therefore,
B (Qdn ) = eqn Qdn − f qnQdn2 (7.19)

where eqn and fqn are first and second order coefficients of reactive power demand
function of nth consumer. The following limits will apply to the dispatchable reactive
power consumption.
0 ≤ Qdcn ≤ ζ n .Qdnmax (7.20)
Hence, the total reactive load at node i is
Qdn = (1 − ζ n )Qdnmax + Qdcn (7.21)

7.2.3 Problem Formulation

The dispatch algorithm for the electricity market has been formulated as an OPF problem
whose objective function and constraints can be described as under.
Objective Function: The objective function of this OPF problem is to maximize the net
social welfare which is the difference between the total consumer benefit and cost of
generation. The total consumer benefit is sum of benefit due to active power and reactive
power demand. Similarly, total supplier cost is sum of cost due to both active and reactive
power generation. The expression for objective function can be written as
Maximize ∑ [B
n∈ND
pn ( Pdn ) + Bqn (Qdn )] − ∑ [C
m∈NG
pm ( Pdm ) + Cqm (Qdm )] (7.22)

where NG is the set of generators and ND is the set of consumers.

Constraints:
(a) Equality Constraints
Power flow equations corresponding to both real and reactive power balance area the
equality constraints which can be written for all k buses.
Pgk − Pdk = Pk ∀k ∈ NB (7.23)
Chapter 7 130

Qgk − Qdk = Qk ∀k ∈ NB (7.24)

where Pgk is the active power generation at bus k, Pdk is the active power demand at bus k,
Qgk is the reactive power generation at bus k, Qdk is the reactive power demand at bus k,
Pk is the active power injection at bus k, Qk is the reactive power injection at bus k and
NB is the set of all buses in the system. The active and reactive power injection at bus k
can further be written as
Pk = ∑P
l∈FBk
l ,ij − ∑P
l∈TBk
l , ji ∀k ∈ NB (7.25)

Qk = ∑Q
l∈FBk
l ,ij − ∑Q
l∈TBk
l , ji ∀k ∈ NB (7.26)

where Pl,ij is the active power flow on line l from bus i to bus j, Pl,ji is the active power
flow on line l from bus j to bus i, Ql,ij is the reactive power flow on line l from bus i to bus
j, Ql,ji is the reactive power flow on line l from bus j to bus i, FBk is the set of all lines
incident from bus k, and TBk is the set of all lines incident to bus k. The active and
reactive power flows on line l can be given by following equations.

i j (Gl cos δ ij + Bl sin δ ij )

Pl ,ij = Vi 2Gl − VV (7.27)

i j (Gl sin δ ij − Bl cos δ ij )

Ql ,ij = −Vi 2 ( Bl + Bshl 2) − VV (7.28)

i j (Gl cos δ ij − Bl sin δ ij )

Pl , ji = V j2Gl − VV (7.29)

i j (Gl sin δ ij + Bl cos δ ij )

Ql , ji = −V j2 ( Bl + Bshl / 2) + VV (7.30)

∀l ∈ NL for (7.28) to (7.31)

where Vi is the voltage magnitude at bus i, Vj is the voltage magnitude at bus j, δij is the
difference between load angle at bus i and bus j, Gl is the conductance and Bl is the
susceptance of line l connecting bus i and bus j. Bsh is the susceptance of shunt elements
and NL is the set of all lines in the system. The power flow equations for all NL lines are
written separately so that they can be directly modified later on to include FACTS
devices. Net consumer demand is calculated as described in Section 7.2.2 for
accommodating the curtailment of loads.
(b) Inequality Constraints
Generator limits: This includes the upper and lower limit of active power generation and
reactive power generation of generators.
min
Pgm ≤ Pgm ≤ Pgm
max
∀m ∈ NG (7.31)
min
Qgm ≤ Qgm ≤ Qgm
max
∀m ∈ NG (7.32)
Chapter 7 131

where Pgmmin and Pgmmax are the minimum and maximum limit of active power generation
of generator m. Qgmmin and Qgmmax are the minimum and maximum limit of reactive power
generation of generator m.
Bus voltage limits: This includes the upper and lower limits on bus voltage magnitudes.
Vkmin ≤ Vk ≤ Vkmax ∀k ∈ NB (7.33)

where Vkmin and Vkmax are the minimum and maximum limit of voltage magnitude at bus k.
Line flow limits: these constraints represent maximum power flow in a transmission line
and are usually based on thermal and dynamic stability considerations.

Sl ,ij = Pl ,ij 2 + Ql ,ij 2 ≤ Slmax ∀l ∈ NL (7.34)

Sl , ji = Pl , ji 2 + Ql , ji 2 ≤ Slmax ∀l ∈ NL (7.35)

where Slmax is the maximum apparent power flow allowed on line l.

7.3 Static Model Representation of FACTS Devices

FACTS devices have been categorized into three types, one characterized as injection of
current in shunt, the second as injection of voltage in series with the line and the third as a
combination of current injection in shunt and voltage injection in series. Basically, there
are two types of shunt controllers for injection of reactive current, the conventional
thyristor based Static VAR Compensator (SVC), and turn-off thyristor based Static
Compensator (STATCOM). Similarly, there are two types of series controllers for
injection of voltage in series, the Thyristor Controlled Series Capacitor (TCSC) and Static
Synchronous Series Compensator (SSSC). There are two type of shunt-series controllers,
the Thyristor Controlled Phase Angle Regulator (TCPAR) and Unified Power Flow
Controller (UPFC).
The existing steady state models of FACTS devices can be classified in two
categories: decoupled and coupled. The decoupled model replaces the FACTS device by
a fictitious bus. This results in modification of the Jacobian structure which is not
desirable. The coupled model can be further sub-classified as Voltage Source Model
(VSM) and Power Injection Model (PIM). In VSM the FACTS device is incorporated as
a series/shunt inserted voltage source according to device’s operating principle. However,
it alters the symmetric characteristics of admittance matrix. The PIM, on the other hand
converts the inserted voltage source into power injection at related buses. This allows
keeping the symmetry of admittance matrix and therefore this model is widely used.
Chapter 7 132

In this section, three FACTS devices namely, SVC, TCSC and TCPAR have been
described. The equations for static modelling of these devices in OPF formulation are
given below

7.3.1 Static Var Compensator (SVC)

SVC is a shunt reactive current injection device whose primary function is dynamic
voltage control. During steady state SVC placed at bus k can be considered as a constant
reactive power injection QSVCk at bus k. It can be included in the model given in Section
7.2 by modifying (7.24) by (7.36) given below
Qgk + QSVCk − Qdk = Qk (7.36)

An additional constraint specifying the minimum and maximum limit for reactive power
injection has also been included
min
urk * QSVCk ≤ QSVCk ≤ urk * QSVCk
max
(7.37)

Where urk = {0,1} is a binary variable representing the presence or absence of SVC in the
system.

7.3.2 Thyristor Controlled Series Compensator (TCSC)

The model of a transmission line with a TCSC connected to line l between bus-i and bus-j
is shown in Figure 7.3. During the steady state TCSC can be considered as a static
reactance –jxc. The real and reactive power flow from bus-i to bus-j (Pcij and Qcij) and
from bus-j to bus-i (Pcji and Qcii) of a line l having series impedance zl=rl+jxl and a series
reactance (-jxc) are

i j (G 'l cos δ ij + B 'l sin δ ij )

Pl ,cij = Vi 2G 'l − VV (7.38)

i j (G 'l sin δ ij − B 'l cos δ ij )

Qlc,ij = −Vi 2 ( B 'l + Bshl / 2) − VV (7.39)

i j (G 'l cos δ ij − B 'l sin δ ij )

Pl ,cji = V j2G 'l − VV (7.40)

i j (G 'l sin δ ij + B 'l cos δ ij )

Qlc, ji = −V j2 ( B 'l + B 'shl / 2) + VV (7.41)

rl −( x − x )
where G 'l = and B 'l = 2 l cl 2 (7.42)
rl + ( xl − xcl )
2 2
rl + ( xl − xcl )
TCSC can be incorporated in the pool model as explained in Section 7.2 by replacing
(7.27) to (7.30) with (7.38) to (7.41) and a new constraint has been introduced as:
0 ≤ xcl ≤ ucl * xclmax ∀l ∈ NL (7.43)
Chapter 7 133

Where ucl = {0,1} is a binary variable defining presence or absence of TCSC in a branch
l.

Bus-i
Bus-j
zl=rl +jxl

Vi -jxcl Vj

jBsh jBsh

Figure 7.3 Equivalent circuit diagram of TCSC

7.3.3 Thyristor Controlled Phase angle Regulator (TCPAR)

The phase shift is achieved by adding or subtracting a variable voltage, which is
perpendicular to the phase voltage of the line. This perpendicular voltage component is
obtained from a transformer connected between the other two phases. The effect of
TCPAR on network can be modelled by a series inserted voltage source VT and a tapped
current IT. as shown in Figure 7.4. The power flow equations from bus-i to bus-j and from
bus-j to bus-i can be written as:
Sij = Pij + Qij = Vi I ij * = Vi ( jVi Bsh + IT + I i′)*
(7.44)
= Vi ( jVi Bsh + I i )
*

S ji = Pji + Q ji = V j I ji* = V j ( jV j Bsh − I i′)* (7.45)

Bus-i
Bus-j
VT I i′ rl +jxl

IT Vi′
Vi Vj

jBshl/2 jBshl/2

Figure 7.4 Equivalent circuit diagram of TCPAR

Chapter 7 134

The active and reactive power flow equations in a line l connected with TCPAR can be
written as below:

i jT ⎣Gl cos(δ ij + φl ) + Bl sin(δ ij + φl ) ⎦

Pl ,sij = Vi 2T 2Gl − VV ⎡ ⎤ (7.46)

i jT ⎣Gl sin(δ ij + φl ) − Bl cos(δ ij + φl ) ⎦

Qls,ij = −Vi 2T 2 ( Bl + Bshl / 2) − VV ⎡ ⎤ (7.47)

i jT ⎣Gl cos(δ ij + φl ) − Bl sin(δ ij + φl ) ⎦

Pl ,s ji = V j2Gl − VV ⎡ ⎤ (7.48)

i j T ⎣Gl sin(δ ij + φl ) + Bl cos(δ ij + φl ) ⎦

Qls, ji = −V j2 ( Bl + Bshl / 2) + VV ⎡ ⎤ (7.49)

Where T = sec φl and φl is the TCPAR setting.

The equivalent circuit model represents the phase shifter as a continuous variable. In
addition an integer variable usl = {0,1} has been introduced that defines the presence (usl
=1) or absence (usl =0) of the phase shifter in branch l. In order to optimally place
TCPAR in the pool model as described in Section 7.2.3, equations (7.27) to (7.30) are
replaced with (7.46) to (7.49) and another constraint has been added as given below
−usl *φl max ≤ φl ≤ usl *φlmax ∀l ∈ NL (7.50)

7.4 Cost of FACTS Devices

With the incorporation of FACTS devices in the market model, it becomes evident to
include the investment cost of FACTS devices in the objective function. This will give an
accurate estimate of marginal price of power in markets with FACTS devices. The
investment cost of FACTS includes the capital cost and installation cost. The installation
cost per MVA is fixed but the capital cost of SVC and TCSC may vary due to economies
of scale. Quadratic cost functions used to estimate the overall costs are given as in [138]:
c(Q factsi ) = (a fi .Q 2factsi − b fi .Q factsi + c fi ) in $/MVar (7.51)

The cost of TCPAR is more related to the power rating of circuit in which it is placed. It
has been expressed as
c( S factsi ) = (b fi .Simax + c fi ) in $/MVA (7.52)

The cost for various FACTS devices has been included in the objective function of the
maximizing the social welfare. As the cost of real and reactive dispatch included are in
$/hr therefore, cost function for FACTS have been taken in $/hr. This has been calculated
by taking an overall period of recovering investment in FACTS as five years
CFACTSi (.) = c(.) × device _ rating / 8760 × 5 (7.53)
Chapter 7 135

7.5 Case Studies

A study of the effect of FACTS devices on active and reactive power marginal prices in
deregulated markets has been carried out by developing a market model based on the
methodology described above. This model is implemented on IEEE 14 bus system data
given in Appendix and is solved using a nonlinear programming solver GAMS/MINOS
[140] to obtain the values of active and reactive power marginal prices. For studying the
influence of FACTS devices on active power marginal price and reactive power marginal
price values three different types of FACTS controllers have been considered
individually: SVC, TCSC and TCPAR. A binary variable u is defined in the model for the
optimal placement of these devices. In each case the modified model is solved using
mixed integer nonlinear programming solver GAMS/DICOPT [140] to determine the
new values of active and reactive power marginal prices at each bus.
For the IEEE 14 bus test system, the variations in marginal prices are depicted in
Figure 7.5 to Figure 7.10. Table 7.1 indicates the statistical information regarding
variation of marginal prices in each case and for both active and reactive power. In
addition to this, the value of social welfare, overall cost of FACTS employed in the
particular case in $ per hour and placement of FACTS devices is also given. Some
important observations can be made from the Figure 7.5 to Figure 7.10.

Figure 7.5 Influence of SVC on APMP

Chapter 7 136

Figure 7.6 Influence of SVC on RPMP

In the base case, with no FACTS device placed in the system, the maximum value
of social welfare obtained was 5499.70 $/h. In the first case, maximum numbers of SVC
to be placed in system were limited to one. With the optimal placement of SVC at bus 9, a
considerable reduction in both active and reactive marginal price in the system has been
observed as shown in Figure 7.5 and Figure 7.6. The amount of reduction achieved is
more evident from the table indicating maximum, minimum and mean marginal prices in
the system. Another useful information is provided by the standard deviation values given
in Table 7.1. A reduction in standard deviation means that the distribution of marginal
price is more near to the mean marginal price. This has an implication for the wheeling
charges, which are calculated on the basis of difference between marginal prices of two
buses.
There is an increase of around 65 $/h in the social welfare which is substantial as
observed from Table 7.1. This table also gives the investment cost per hour of the SVC.
This cost has been found as 53 $/h. This shows the financial viability of placing one SVC
in the system. Subsequently, if we increase the number of SVCs to two and three, further
drop in marginal prices has been observed. The amount of reduction though now is very
less as compared to that in the first case. Similarly, the social welfare increases but not as
significantly as in first case. While the cost of employing second and third SVC increases
considerably. This type of study can be used to see the financial viability of placing
FACTS in the system. Thus, one SVC in the system is enough to obtain the optimum
value of social welfare.
Chapter 7 137

Table 7.1 Results for 14 Bus Test System

APMP(in $/MWh) RPMP (in $/ MVArh) Social Welfare Cost of FACTS Placement of FACTS
Max Min Mean Std Max Min Mean Std (in $/h) (in $/h)
No Facts 38.33 21.80 29.45 4.063 2.206 -0.148 1.287 0.720 5499.70 - -
1 SVC 33.28 21.99 27.63 2.775 0.846 -1.069 0.159 0.482 5565.00 53.17 Bus 9
2 SVC 32.74 22.02 27.42 2.633 0.615 -1.079 0.038 0.398 5570.40 58.89 Bus 9,12
3 SVC 32.28 22.04 27.23 2.511 0.524 -1.016 -0.012 0.351 5573.30 61.15 Bus 9,12,14
1 TCSC 28.87 22.26 25.68 1.575 3.591 -0.154 1.618 0.965 5523.50 32.95 Line 2-3
2 TCSC 26.83 22.36 24.90 1.083 3.880 -0.114 1.600 0.978 5528.90 82.40 Line 2-3,7-9
3 TCSC 26.85 22.36 24.86 1.078 4.031 -0.113 1.597 1.024 5533.30 105.62 Line 2-3,7-9,1-5
1 TCPAR 26.89 22.37 24.92 1.097 4.054 -0.102 1.686 1.025 5520.70 32.62 Line 1-5
2 TCPAR 26.53 22.38 24.81 1.026 3.295 0.008 1.472 0.805 5540.20 97.85 Line 1-5,1-2
3 TCPAR 26.51 22.38 24.80 1.021 3.275 0.014 1.467 0.799 5542.10 130.46 Line 1-5,1-2,2-4
Chapter 7 138

A similar simulation is done with the placement of TCSC and TCPAR in the system with
increase in their number. It was observed that the impact of these devices was more
pronounced on active power marginal price rather than reactive power marginal price as
observed from Figure 7.7 to Figure 7.10. From Figure 7.7and Figure 7.8, it has been
observed that with the optimal placement of TCSC there is a significant reduction in
APMP. There is further reduction in APMP as the number of TCSC placements increase
in the system and increase in social welfare has also been found significant. Two TCSCs
placed on lines 2-3 and 7-9 were found to be sufficient to obtain maximum reduction in
APMP.

Figure 7.7 Influence of TCSC on APMP

Figure 7.8 Influence of TCSC on RPMP

Chapter 7 139

From Figure 7.8 it has been observed that with presence of TCSC, there is no
significant reduction in marginal price of reactive power. The difference is not significant
as the number of devices increase. However, for bus 13 and 14, some increase in RPMP
is observed. This is due to change in the reactive power flows on lines connecting bus 12
and 14 due to placement of TCSC.

Figure 7.9 Influence of TCPAR on APMP

Figure 7.10 Influence of TCPAR on RPMP

Chapter 7 140

From Figure 7.9 and Figure 7.10, it has been observed that with the optimal
placement of TCPAR there is a significant reduction in APMP and increase in social
welfare has also been found significant. As the number of TCPAR placements were
increased, the decrease in APMP was not so significant. Two TCPAR placed on lines 1-5
and 1-2 were found to be sufficient to obtain maximum reduction in APMP. From Figure
7.10 it has been observed that with presence of TCPAR, there is no significant reduction
in marginal price of reactive power. The difference is not significant as the number of
devices increase. However, for bus 13 and 14, some increase in RPMP is observed. This
is due to change in the reactive power flow on lines connecting bus 13 and 14 due to
placement of TCPAR.

7.6 Conclusions
In this chapter, mixed integer nonlinear programming based approach has been proposed
for optimal placement of FACTS controllers and their potential role in determination of
active and reactive power marginal prices has been studied. The cost of FACTS
controllers have also been considered to obtain the accurate impact on price signals The
marginal price of both active and reactive power improves with the optimal placement of
SVC, however considerable improvement in the reactive power marginal price has been
obtained with SVC. As the number of SVCs is increased to three the impact on marginal
prices also improves. With the optimal placement of TCSC and TCPAR in the system,
significant improvement in active power marginal price has been observed, however there
is no significant change in reactive power marginal price.
Chapter 8 141

Chapter 8

Impact of UPFC and ST on Spot

Electricity Prices
8.1 Introduction
In this chapter, a two step optimization problem of maximizing the loadability of the
system and social welfare has been proposed. In social welfare function, both real and
reactive power bid functions have been considered. We determined the spot price of real
and reactive power for base case conditions and at maximum loadability of the system.
The impact of new family member of power flow controller called “Sen” Transformer
(ST) and UPFC has been determined on the spot prices of active and reactive power and
their results have been compared as both the controllers have wide range of operating
capability to control power flow. Mixed integer non-linear programming approach has
been proposed for optimal location of ST and UPFC and their impact on the spot prices of
real and reactive power have been determined and compared at maximum loadability
condition. The effectiveness of the proposed approach has been tested on IEEE 14-bus
and IEEE-57 bus test systems.

8.2 Static Model Representation of Power Flow Controllers

Both UPFC and ST belongs to a family of power flow controllers which can affect both
active and reactive power flow through a line. Their steady state models are given as
following:

8.2.1 Unified Power Flow Controller

UPFC belongs to a family of power flow controllers which can affect both active and
reactive power flow through a line. The basic structure of a UPFC is shown in Figure 8.1.
A UPFC consists of two linked self commutating voltage source converters sharing a
common DC capacitor, which are connected to the AC system through series and shunt
coupling transformers. UPFC generates or absorbs the needed reactive power locally by
Chapter 8 142

the switching operation of its converters. The series converter performs the main function
of the UPFC, where it produces an AC voltage of controllable magnitude and phase
angle, and injects this voltage at fundamental frequency in series with the transmission
line through a series booster transformer. The active power needed by this converter is
provided from the AC power system by the shunt converter through the DC link.

Series
Transformer
Bus i Bus j

Shunt
Transformer

Figure 8.1 Schematic diagram of the UPFC

Figure 8.2 shows equivalent circuit of UPFC during steady state conditions. Series
converter provides the main function of the UPFC by injecting an AC voltage VT with
controllable magnitude VT (0<VT<VTmax) and phase angle φT (0<φT <360°) at the power
frequency in series with line via an insertion transformer. This injected voltage can be
considered essentially as a synchronous AC voltage source. The transmission line current
flows through this voltage source resulting in a power exchange between controller and
the AC system. The real power exchanged at the AC terminal (i.e. at the terminal of the
insertion transformer) is converted by the shunt converter into DC power, which appears
at the DC link as positive or negative real power demand. The reactive power exchanged
at the AC terminal is generated internally by the shunt converter. In addition to this UPFC
can independently control the reactive current flow Iq at the point of connection with
transmission line. Therefore, UPFC has three controllable parameters namely, magnitude
and angle of series inserted voltage (VT and φT) and magnitude of current Iq.
Chapter 8 143

Bus-i UPFC Bus-j

Ii Ii’ Gl +jBl
VT
Vi Vj
Iq IT
Vi’
jBshl/2 jBshl/2

Figure 8.2 Equivalent circuit of UPFC

Based on the principle of UPFC, the basic mathematical relations can be given as:

Vi′ = V j + VT (8.1)

Arg ( I q ) = Arg (Vi ) ± π / 2, (8.2)

Arg ( IT ) = Arg (Vi ) (8.3)

The real power exchanged in UPFC can be written as:

Vi IT = Re[VT I i '* ] (8.4)

The Power flow equations from bus-i to bus-j and from bus-j to bus-i can be written as
Sij = Pij + jQij = Vi I ij * = Vi ( jVi Bsh / 2 + IT + I q + I i ' )* (8.5)

S ji = Pji + jQ ji = V j I ji* = V j ( jV j Bsh / 2 − I i ' )* (8.6)

Active and reactive power flows in the line l having UPFC can be written, with above
equations as,
Pl ,ij = (Vi 2 + VT2 ) Gl + 2VV
i T Gl cos (φT − δ i ) −

V jVT ⎡⎣Gl cos (φT − δ j ) + Bl sin (φT − δ j ) ⎤⎦ − (8.7)

i j ( Gl cos δ ij + Bl sin δ ij )
VV

Pl , ji = V j2Gl − V jVT ⎡⎣Gl cos (φT − δ j ) − Bl sin (φT − δ j ) ⎤⎦ −

(8.8)
i j ⎣Gl cos δ ij − Bl sin δ ij ⎦
VV ⎡ ⎤

Ql ,ij = −Vi I q − Vi 2 ( Bl + Bshl 2 ) − VV ⎣Gl sin (φT − δ i ) + Bl cos (φT − δ i ) ⎤⎦

i T ⎡
(8.9)
i j ⎣Gl sin δ ij − Bl cos δ ij ⎦
− VV ⎡ ⎤

Ql , ji = −V j2 ( Bl + Bshl 2 ) + VV
i j ⎣Gl sin δ ij + Bl cos δ ij ⎦ +
⎡ ⎤
(8.10)
V jVT ⎡⎣Gl sin (φT − δ j ) + Bl cos (φT − δ j ) ⎤⎦
Chapter 8 144

8.2.2 Sen Transformer

Although UPFC is the most versatile power flow controller that has ever been
built, its high installation and operating costs must be reduced before it can be successful
commercially in utility applications. The ST on the other hand is a promising, low-cost
power flow controller that provides voltage regulation at a point in a transmission line.
Additionally, the ST provides the same independent active and reactive power flow
control as UPFC, albeit at a reduced dynamic rate. The ST uses reliable, cost effective,
and proven transformer and tap changer-based technology. Hence, the ST is adequate and
economically attractive to meet today’s utility’s need for independent control of active
and reactive power flow in a transmission line. The comparison of the features of UPFC
and ST [81] are listed in Table 8.1.

Table 8.1 Comparison of features of UPFC and ST

UPFC ST
Voltage regulation Yes Yes
Independent line active and reactive power control Yes Yes
Low installation and operating costs Yes
Reliability and high availability Yes
Injection of line frequency voltage Yes
Low leakage reactance in coupling transformer Yes
Fast bypass switch not needed Yes
Adequate response for utility applications Yes Yes
Coarse voltage injection limited by number of taps Yes
Capability of independent reactive power generation and absorption. Yes
Losses 3-8% <1%
Cost ($/kVA) 75-100 15-20

Figure 8.3 shows a ST, which is a single core, three phase transformer with a Y-
connected primary winding and nine secondary windings. The voltage Vi at any point in
the electrical system is applied to the primary windings of ST. A total of nine secondary
windings (a1, c2 and b3 on the core of A-phase, b1, a2 and c3 on the core of B-phase, and
c1, b2 and a3 on the core of C-phase) constitute the voltage and impedance regulating
unit. By choosing the number of turns of each of the three windings, and therefore, the
Chapter 8 145

magnitudes of the components of three 120° phase shifted induced voltages, the
compensating voltage VT in any phase is derived from the phasor sum of voltages
induced in a three phase winding set (a1, a2, and a3 for injection in A-phase, b1, b2 and
b3 for injection in B-phase, and c1, c2, and c3 for injection in C-phase). The
compensating voltage is of line frequency and is connected in series with the line through
autotransformer action.

Exciter Unit

a3

b2

c1

b1 a1 c2 b3

a2

Voltage & Impedance

c3 Regulating Unit

Figure 8.3 Schematic diagram of the Sen Transformer

The equivalent circuit of UPFC given in Figure 8.2 is also applicable to the ST as
it also injects an AC voltage VT with controllable magnitude VT (0<VT<VTmax) and phase
angle (0<φT <360°) at the power frequency in series with line, albeit it does not uses any
converter or inverter. Another difference in case of ST is that the reactive power
exchanged instead of being supplied by the device internally, appears as a reactive power
demand at exciter unit of ST. Therefore, the active and reactive power exchange in ST is
given as:
Chapter 8 146

Vi IT = Re[VT I i '* ] (8.11)

Vi I q = Im[VT I i '* ] (8.12)

The power flow equations in the presence of ST can be written as:

i T Gl cos (φT − δ i ) −
Pl ,ij = (Vi 2 + VT2 )Gl + 2VV
V jVT ⎡⎣Gl cos (φT − δ j ) + Bl sin (φT − δ j ) ⎤⎦ (8.13)

i j ( Gl cos δ ij + Bl sin δ ij )
−VV

Pl , ji = V j2Gl − V jVT ⎡⎣Gl cos (φT − δ j ) − Bl sin (φT − δ j ) ⎤⎦ −

(8.14)
i j ⎣Gl cos δ ij − Bl sin δ ij ⎦
VV ⎡ ⎤

Ql ,ij = −Vi 2 ( Bshl 2 ) − (Vi 2 + VT2 ) Bl −

i T Bl cos (φT − δ i ) −
i j ⎣Gl sin δ ij − Bl cos δ ij ⎦ − 2 VV
VV ⎡ ⎤ (8.15)

V jVT ⎡⎣Gl sin (φT − δ i ) + Bl cos (φT − δ i ) ⎤⎦

Ql , ji = −V j2 ( Bl + Bshl 2 ) + VV
i j ⎣Gl sin δ ij + Bl cos δ ij ⎦ +
⎡ ⎤
(8.16)
V jVT ⎡⎣Gl sin (φT − δ j ) + Bl cos (φT − δ j ) ⎤⎦

The above equivalent circuit model represents both UPFC and ST with the capability of
controlling the real and reactive power flow.

8.3 OPF Formulation for Determining Spot Prices under Maximum Loadability
The objective of this chapter is to compare the steady state performance of UPFC and ST
in terms of their impact on spot price of active and reactive power under the normal and
peak load conditions. It is important to mention here that in this work performance of
UPFC and ST are compared only under steady state conditions. UPFC due its fast
dynamic response has number of other applications e.g. damping oscillations, transient
and dynamic stability and voltage stability, apart from its ability to control real and
reactive power flow on transmission lines. ST being based on traditional tap-changing
transformer technology does not offers a good dynamic response as yet, but has got
ability to control real and reactive power flow comparable to that of UPFC.
In order to investigate the problem in a systematic manner, the problem has been
subdivided into three parts. In the first part, a model has been developed for determining
active and reactive Spot Prices under base load conditions. In the second part, this model
has been extended to determine Spot Prices under maximum loadability conditions. A
two step optimization approach is followed in this part wherein in the first step,
Chapter 8 147

loadability factor is maximized and in the second step Spot Prices are determined at
maximum loadability determined in first step. In the third part, UPFC and ST are
introduced in the two step optimization approach and their impact on spot prices under
maximum loadability is observed. The equations governing the above three models are
described as follows:

8.3.1 Model I
In this model an OPF has been formulated to determine the spot prices of active and
reactive power under base load conditions. The objective function of the problem is to
maximize social welfare subject to the load flow equations, line flow, bus voltage and
generator constraints.
Maximize ∑ B (P
n∈ND
n dn , Qdn ) − ∑C
m∈NG
m ( Pgm , Qgm ) (8.17)

Subject to
Pgk − Pdk = Pk ∀k ∈ NB (8.18)

Qgk − Qdk = Qk ∀k ∈ NB (8.19)

Pk = ∑P
l∈FBk
l ,ij − ∑P
l∈TBk
l , ji ∀k ∈ NB (8.20)

Qk = ∑Q
l∈FBk
l ,ij − ∑Q
l∈TBk
l , ji ∀k ∈ NB (8.21)

i j (Gl cos δ ij + Bl sin δ ij )

Pl ,ij = Vi 2Gl − VV (8.22)

i j (Gl sin δ ij − Bl cos δ ij )

Ql ,ij = −Vi 2 ( Bl + Bshl 2) − VV (8.23)

i j (Gl cos δ ij − Bl sin δ ij )

Pl , ji = V j2Gl − VV (8.24)

i j (Gl sin δ ij + Bl cos δ ij )

Ql , ji = −V j2 ( Bl + Bshl / 2) + VV (8.25)
min
Pgm ≤ Pgm ≤ Pgm
max
∀m ∈ NG (8.26)
min
Qgm ≤ Qgm ≤ Qgm
max
∀m ∈ NG (8.27)

Vkmin ≤ Vk ≤ Vkmax ∀k ∈ NB (8.28)

Sl ,ij = Pl ,ij 2 + Ql ,ij 2 ≤ Slmax ∀l ∈ NL (8.29)

Sl , ji = Pl , ji 2 + Ql , ji 2 ≤ Slmax ∀l ∈ NL (8.30)

While calculating the social welfare linear bids from generators and consumers
have been taken. Here, bids from reactive power have also been taken from both sides to
Chapter 8 148

get realistic values of reactive power spot prices. The benefit function and cost function
for both active and reactive power can be described as:
Cm ( Pgm ) = bpm Pgm + c pm Pgm
2
∀m ∈ NG (8.31)

Cm (Qgm ) = bqmQgm + cqmQgm

2
∀m ∈ NG (8.32)

Bn ( Pdn ) = e pn Pdn − f pn Pdn2 ∀n ∈ ND (8.33)

Bn (Qdn ) = eqn Qdn − f qnQdn2 ∀n ∈ ND (8.34)

The reactive power bids have been considered in this model as UPFC and ST
affect both real and reactive power flow on lines. This may prevent the violation of
voltage limits at certain buses. The impact of UPFC and ST on this account can be
observed through changes in reactive power spot prices calculated using this model.
Determination of the cost of reactive power production and structure of reactive bid has
been discussed in the introduction. For the sake of keeping problem simple linear reactive
bids have been assumed here. The problem is formulated as and NLP and solved using
GAMS/ MINOS solver [140].

8.3.2 Model II
In this model an OPF is formulated to determine the price of active and reactive power
under maximum loadability condition. A two step optimization approach is followed
wherein in the first step, loadability factor σ is maximized. Maximum loadability σ * is
achieved by maximizing loadability factor, a factor which increases the active and
reactive demand at all load buses linearly keeping the power factor constant. The
objective function in the first step can be given as:
Maximize σ (8.35)
Subject to:
Pgk − σ .Pdk = Pk ∀k ∈ NB (8.36)

Qgk − σ .Qdk = Qk ∀k ∈ NB (8.37)

All other equality and inequality constraints are same as (8.20)-(8.30). Both Pdk and Qdk
have been increased in the same ratio to have same power factor at all loading conditions.
In the second step, knowing the maximum loadability point, the social welfare is
maximized at maximum loadability σ *. The equations can be written as:
Max. ∑ B (σ
n∈ND
n
*
.Pdn , σ * .Qdn ) − ∑C
m∈NG
m ( Pgm , Qgm ) (8.38)
Chapter 8 149

Subject to
Pgk − σ ∗ .Pdk = Pk ∀k ∈ NB (8.39)

Qgk − σ ∗ .Qdk = Qk ∀k ∈ NB (8.40)

All other constraints are same as (20)-(31). Both the steps are NLP problems solved using
GAMS/MINOS [140].

8.3.3 Model III

The general form of optimization problem maximizing loadability and social welfare in
the presence of power flow controllers has been formulated as MINLP due to introduction
of binary variable w. It has been solved using GAMS/ DICOPT solver [140]. In general
form the problem may be written as
Max f (x, u) (8.41)
Subject to
g(x,u, w) = 0 (8.42)
h(x,u, w) ≤ 0 (8.43)
where x represents the vector of state variables and u represents the vector of control
variables and w represents the vector of binary variables {0,1}, 0 will represent absence
and 1 will represent presence of control device. In this model a two step optimization
approach similar to Model II is followed in presence of power flow control devices. In
presence of UPFC the line flows calculated in (8.22) to (8.25) will be replaced by (8.7) to
(8.10) and for ST, the line flow equations will be replaced with (8.13) to (8.16). In
addition to the above equations, there will be limits on three control variables VT, Iq and
φT for UPFC and two control variables VT and φT for ST.
0 ≤ VTl ≤ wl . ∗ VTmax ∀l ∈ NL (8.44)

− wl * φTmax ≤ φTl ≤ wl * φTmax ∀l ∈ NL (8.45)

− wl * I qmax ≤ I ql ≤ wl * I qmax ∀l ∈ NL (8.46)

Total number of installed power flow control devices (N ) must satisfy the relation.
Nφ = ∑ w ≤ Nφ
l∈NL
l
max
(8.47)
Chapter 8 150

8.4 Case Studies

The case studies have been presented for the two test systems of IEEE 14 bus and IEEE
57 bus. A discussion on the variation of spot prices under different loadability conditions
and in presence of power flow controllers has been given below

Table 8.2 Coefficients for Active and Reactive bids

Gen No. Active Power Bid Reactive Power
Coefficients Bid Coefficients
14 Bus bp cp bq cq
G1 0.01 20 0 0.01
G2 0.01 20 0 0.01
G3 0.01 30 0 0.02
G6 0.01 35 0 0.02
G8 0.01 45 0 0.03
57 Bus bp cp bq cq
G1 0.021 20 0 0.0062
G2 0.05 40 0 0.01
G3 0.25 20 0 0.01
G6 0.05 40 0 0.01
G8 0.022 20 0 0.0016
G9 0.05 40 0 0.01
G12 0.031 20 0 0.0055

8.4.1 Results for IEEE 14 Bus System

An IEEE 14 bus test system with 5 generators and 11 loads has been considered for the
study. The generation active and reactive cost coefficients have been given in Table 8.2
Consumer benefit coefficients for all loads have been taken as ep= 60 $/ MWh and fp=
0.05 $/MWh2 for active power and eq= 6 $/ MVArh and fq= 0.05 $/MVArh2 for reactive
power. First, we compare the maximum loadability achieved using Model II and Model
III. Figure 8.4 shows the comparison between maximum loadability achieved without any
device (Model II), with UPFC and with ST (Model III). The optimal setting of control
variables and placement of UPFC and ST as obtained using MINLP has been shown in
Table 8.3.
Chapter 8 151

2.08

2.06
Max loadability Factor
2.04

2.02

1.98
1.96

1.94

1.92
Without any Device With UPFC With ST

Figure 8.4 Maximum System Loadability in IEEE 14 Bus Case

Table 8.3 Optimal Location and Control Parameters for UPFC and ST
14 Bus VT (p.u.) φT ( °) Iq (p.u.) Line no.
UPFC 0.12 76.47 -0.16 3
ST 0.09 16.77 - 4
57 Bus VT (p.u.) φT ( °) Iq (p.u.) Line no.
UPFC 0.06 86.67 -0.22 15
ST 0.12 -78.61 - 16

Maximum loadability factor achieved without placing any device in the system
was found to be 1.977. With the optimal placement of one UPFC on line 2-3, maximum
loadability factor increased to 2.064 and with optimal placement of one ST on line 2-4, a
maximum loadability of 2.03 was achieved. It is observed that the system loadability
improves with the placement of both UPFC and ST. There is 4.4% increase in the
loadability compared to base case in case of UPFC and 2.7% increase in case of ST.
Another parameter observed in this study is the marginal price of both active and
reactive power in the base case, maximum loadability condition and in the presence of
UPFC and ST. In order to draw conclusion regarding effect of UPFC and ST on marginal
prices, we compared the marginal price of active and reactive power in following cases:
Case A: The base case spot prices determined using Model I
Chapter 8 152

Case B: Spot Prices at maximum loadability (σ *=1.977) without any device (Model II)
Case C: Spot Prices at maximum loadability point (σ *=1.977) with one UPFC (Model III)
Case D: Spot Prices at maximum loadability point (σ *=1.977) with one ST (Model III).
It is important to mention here that σ *=1.977 as determined in Case B has been
considered in the determination of spot prices and impact of power flow controllers in
Case C and Case D to compare their performance on variation of marginal prices.

120

100
Marginal Price ($/MWh)

80

60

40

20

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Bus No.

Case A Case B Case C Case D

Figure 8.5 Active Power Marginal Price for IEEE 14 Bus System
Figure 8.5 shows the comparison of active power marginal price at all buses for
the above four cases. It is observed that during the maximum loading conditions, the
active power spot price at Bus no. 3 becomes very high as compared to the base case
condition. The impact of UPFC and ST on the real power price has been determined and
it is observed from the Figure 8.5 that the marginal price reduces for all the buses and at
Bus No. 3 the price reduces considerably with both the devices. As observed from Figure
8.5, the marginal price reduction is found to be comparable for both power flow
controllers. Both the controllers are very effective in reducing the rise in the marginal
price.
Figure 8.6 gives the comparison of reactive power marginal price at all buses for
the four cases. The difference in the marginal price of reactive power between two buses
gives the cost of wheeling reactive power between those buses [91] Therefore, lesser the
spatial deviation in marginal price of reactive power, easier it would be to wheel reactive
power from one point to another in the system. It was observed that there are very high
Chapter 8 153

fluctuations in the marginal price of reactive power at maximum loadability point. With
the use of a UPFC these fluctuations decreased considerably making the spatial
distribution of marginal price smooth. In the presence of ST there is reduction in price
fluctuation and is comparable to that of UPFC. It is observed that both the controllers
have almost comparable control on the flow of real and reactive flows and marginal
prices at the all buses.

1
0.5
Marginal Price ($/MVArh)

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14
-0.5
-1
-1.5
-2
-2.5
-3
-3.5
Bus No.

Case A Case B Case C Case D

Figure 8.6 Reactive Power Marginal Price for IEEE 14 Bus System

8.4.2 Results for IEEE 57 Bus System

IEEE 57 bus test system comprises seven generators and 42 loads with total eighty lines
in the system. The system data is given in Appendix and the generation active and
reactive cost coefficients are given in Table 8.2. Consumer benefit coefficient for all
loads has been taken as ep= 60 $/ MWh and fp= 0.05 $/MWh2 for active power and eq= 6
$/ MVArh and fq= 0.05 $/MVArh2 for reactive power. Again we start with comparing the
maximum loadability achieved using Model II and Model III. The results of loadability
enhancement with the power flow controllers and without power flow controllers has
been shown in the Figure 8.7. The results of loadability enhancement have also been
determined in the presence of more than one FACTS controller. The comparison of
results between maximum loadability achieved in the following five cases: without any
device, with one UPFC, with two UPFCs, with one ST and with two STs has been shown
Chapter 8 154

in the Figure 8.7. The optimal setting of control variables and placement of UPFC and ST
as obtained using MINLP has been shown in Table 8.3.

1.34

1.32
Max Loadability Factor

1.3

1.28

1.26

1.24

1.22

1.2
Without With UPFC With ST With 2 With 2 ST
any Device UPFC

Figure 8.7 Maximum System Loadability in IEEE 57 Bus Case

Maximum loadability factor achieved without placing any device in the system
was found to be 1.25. With the optimal placement of one UPFC on line 1-15 maximum
loadability increased to 1.294 and with placement of another UPFC on line 8-9 maximum
loadability increased to 1.316. With placement of one ST on line 1-15 a maximum
loadability factor of 1.291 was achieved and with placement of another ST on line 1-16
maximum loadability factor increased to 1.312. Though, the increase in loadability is
small, but it is important to note that ST gave a performance comparable to UPFC (there
was 5.3% increase in case of UPFC and 5.0 % increase in case of ST).
For the IEEE 57 Bus system a comparison of the spatial distribution of marginal
price of both active and reactive power marginal prices has been determined for the four
different cases.
Case A: The base case spot prices determined using Model I
Case B: Spot Prices at maximum loadability (σ *=1.25) without any device (Model II)
Case C: Spot Prices at maximum loadability point (σ *=1.25) with one UPFC (Model III)
Case D: Spot Prices at maximum loadability point (σ *=1.25) with one ST (Model III).
Chapter 8 155

It is important to mention here that σ *=1.25 as determined in Case B has been considered
in the determination of Spot Prices and impact of power flow controllers in Case C and
Case D to compare their performance on variation of marginal prices.
Figure 8.8 shows the comparison of active power marginal price at all buses for
all the cases. It has been observed that the active power spot price increases to very high
values at maximum loadability point (σ =1.25) and these high prices can cause the
inefficiency in the market operation. Use of a UPFC in this case resulted in considerable
reduction in peak as well as average marginal price throughout the system. The spatial
distribution of real power marginal price with optimal placement of a ST almost overlaps
that of one with UPFC in the IEEE 57 bus system. This shows the equivalent capability of
ST to control the marginal prices rise under the maximum loadability conditions of the
system.
Figure 8.9 gives the comparison of reactive power marginal price at all buses for
the four cases in IEEE 57 bus system. It has been observed that there are drastic
variations of the marginal prices at the maximum loadability point. In the presence of
UPFC and ST, the marginal prices of reactive power are considerably reduced compared
to their values at the maximum loading point. It is observed that ST performance in
controlling the spot price variations is comparable to that of UPFC.
The convergence time and iteration count for both 14 bus and 57 bus systems has
been summarized in Table 8.4. These results are for a 1.8GHz Intel Core 2 Duo™ based
CPU with 1.5 GB RAM. As discussed in previous section Case A and Case B are based
on Model I and Model II respectively and are solved using MINOS. The MINOS is able
to converge within a fraction of second even for the 57 bus network. On the other hand,
Case C and case D are based on Model III and solved using DICOPT solver. The
convergence time for the 14 bus system in this case has been between 1 to 2 s but the
solver has taken large number of iterations to converge to the integer solution. It has taken
a maximum of 5.32 s to converge to solution for the 57 bus system, so we can say that the
performance of solver is reasonable for any mid sized network. For large systems
MINLP problems are tough to handle, and convergence time may increase manifold as
the size of network increases. If we are able to reduce the size of network for analysis
purpose, MINLP can offer an effective method for placement of power flow controllers.
Chapter 8 156

120

100
Marginal Price ($/MWh)

80

60

40

20

0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55
Bus no.

Case A Case B Case C Case D

Figure 8.8 Active Power Marginal Price for IEEE 57 Bus System
Chapter 8 157

4
Marginal Price ($/MVArh)

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57
-2

-4

-6

-8
Bus No.

Case A Case B Case C Case D

Figure 8.9 Reactive Power Marginal Price for IEEE 57 Bus System
Chapter 8 158

Table 8.4 Computational Performance on 1.8 GHz Intel Core 2 Duo™ Processor
14 Bus Case A Case B Case C Case D
Time (s) 0.016 0.031 1.045 0.496
Iteration Count 104 131 3833 1742
57 Bus Case A Case B Case C Case D
Time (s) 0.152 0.219 5.323 2.468
Iteration Count 461 492 9154 5093

In this chapter, it has been shown that as the system loadability increases, the spot
prices of active and reactive power becomes very high and fluctuates across the system.
Under these circumstances, the increase in the marginal prices have to be controlled and
the power flow control devices e.g. the FACTS can control the steep rise in the prices and
resulting the better market operation with better social benefits. But high cost of these
devices has been a cause of concern. ST promises to give a performance at par with
UPFC at a much lower cost as that of the cost of a conventional PAR compared to the
cost of UPFC.

8.5 Conclusions
In this chapter, a two step optimization model for determining active and reactive
marginal prices at maximum loadability point of the system is presented. This model can
also take into account the presence of power flow controllers like UPFC and ST. The role
of optimally located UPFC and ST has been studied on the control of the marginal prices.
The study has been conducted on the two IEEE test systems of 14 and 57-bus for a pool
market model. From the study, the following conclusions have been made:
• The loadability factor increases in the presence of both UPFC and ST. In the case
of 57-bus test system, the loadability has also been determined with the optimally
placed multiple controllers and with the two UPFC and ST the loadability
obtained with ST is found to be comparable that of obtained using UPFC. More
number of ST can be deployed in the system to enhance system loadability as well
as control of price variations due to their low cost. However, more than one UPFC
in the system is not economically justifiable.
Chapter 8 159

• At the maximum loading point of the system, it has been observed that there is
drastic increase and variations in the marginal prices of both real and reactive
power and these prices are high as compared to the prices at base case.
• In the presence of optimally located UPFC and ST, a reduction in the marginal
prices bringing them very near to the base case values, has been observed and the
performance of the ST is found to be comparable with that of UPFC.
It has been observed from the present study that the performance of ST is comparable to
that of UPFC in enhancing loadability as well as control of real and reactive power
marginal prices at each bus. Due to the low cost of ST which is comparable to that of
phase angle regulator, this device can provide more promising economic solutions under
steady state condition in the present open access market scenario.
Chapter 9 160

Chapter 9

Conclusion
9.1 Main Conclusions
The research work done in this thesis is mainly on frequency regulation in a competitive
environment using a frequency linked real-time pricing scheme. Chapter 1 introduces the
basic framework of a competitive electricity market. The conventional approach for
frequency regulation has been presented in this chapter. A rigorous review of literature
available on frequency regulation issues in competitive electricity markets and price-
based frequency regulation has been presented.
Chapter 2 introduces the institutional framework of electricity sector in India. It
highlights the role played by various entities and agencies and discusses the challenges
faced by the sector. One of the main challenges that Indian electricity sector faces is the
shortage of power generation capacity to meet its peak load and energy demands. Several
reform measures have been initiated by the Government to boost generation capacity.
Although the shortage is still persisting, the reforms were instrumental in encouraging the
trading of electricity in India and increasing the share of private sector in capacity
addition. Another challenge faced by the sector was in operation of its synchronous
regional grids, which observed wide and rapid fluctuation in frequency before 2002,
threatening the grid security. Introduction of ABT in 2002 led to drastic improvements in
the grid frequency condition.
ABT not only improved the frequency profile of regional grids, but also
encouraged competitiveness and economic efficiency. The study done in this chapter
show that beneficiary states can use economic load dispatch as a tool to minimize their
payments and promote economic efficiency under this new ABT regime. During the high
frequency conditions they can draw more power from the grid as grid power is available
at a lower price. Under low frequency conditions they can under-draw from the grid and
look for other sources of power, which are now less expensive. In this way, they can not
only minimize their costs but also help in reducing frequency deviations in the grid.
Chapter 9 161

In Chapter 3, various options available to the participants of Indian electricity

sector for trading electricity have been discussed. Special attention has been given to
trading option available through the UI mechanism. A model of regional grid is
presented, which can be used to analyse the impact of action of various entities like,
ISGSs, SEBs, SGSs, and IPPs on the grid frequency, UI price, and UI energy exchanges
of these entities. A test system having three states (i.e. three SEBs), three ISGSs, and
three IPPs is taken to simulate the regional grids. Additionally, a model for price based
automatic generation control for regulating the grid frequency conforming to the
operational guidelines given in IEGC has been proposed. Using the regional grid model,
the application of price based controls by generation entities in the Indian electricity
market has been demonstrated. The response due to these controls has been found to be in
conformity with operational guidelines given in IEGC. The frequency regulation with the
adoption of these controls was found to be better as compared to the current manual
control and also helps in upholding merit-order dispatch during real-time operation. The
most important conclusion drawn from the study in this chapter is that in order to give
appropriate price signal to all generation entities, the UI mechanism must be
synchronized with the spot price discovered in the day-ahead markets.
In Chapter 4, an alternate frequency control mechanism based on frequency linked
price signals is presented. In this mechanism, price of energy in the real-time market is
framed on an inverse price-frequency curve that translates frequency deviation due to
demand-supply imbalance into a price deviation. Main advantage of this mechanism is
that the current price of energy in real-time market can be known by any participant by
simply sensing the grid frequency. Equipped with knowledge of price in real-time, they
can take economic decisions regarding their unscheduled supply or demand. A price-
based automatic generation control mechanism has also been proposed in this work. This
mechanism can replace the conventional AGC mechanism by giving a reasonable
performance in terms of frequency control and offer several additional advantages.
Simulation on a test system of four Gencos with price-based frequency control is carried
to show that the proposed mechanism is decentralized, simple, and results in
economically efficient outcome. Although this mechanism does not drives the frequency
error to perfect zero, it has been shown that frequency error is very small for normal load
deviations. In comparison to the UI mechanism, working presently in Indian electricity
grids, the proposed mechanism gives considerably less deviations from nominal
frequency. Even for large load changes or loss of large generators the system holds
Chapter 9 162

together and gives adequate economic signal to generators to take appropriate action. For
the purpose of settlement in the real-time market, it is sufficient to integrate the UI energy
consumption and real-time price over a period of five minutes, without much compromise
in the revenue and payments of generators and loads.
Chapter 5 proposes a mechanism of achieving real-time demand response through
dynamic demand control by utilizing frequency based real-time pricing introduced in
Chapter 4. A real-time price/frequency based load control for air conditioning load is
simulated. This control changes the thermostat setting of air-conditioner in response to
the changes in system frequency. Physically based load models of air conditioning loads
are used to extract load reduction achieved with the exercise of this control. The result of
simulation on a single air conditioner show that significant reduction in energy
consumption can be achieved during frequency dips. The results of simulation in an
example of a real-time market with four Gencos and four Discos show that such load
control not only results in better frequency control but also lower the real-time price of
energy. The savings occurring to the Discos are significant as payments made by them to
the SO for UI energy are considerably reduced due to proposed control of air conditioning
load. The study done in this chapter shows that by employing dynamic demand control
schemes based on the proposed frequency linked pricing mechanism, the contribution of
demand side resources in managing grid frequency can be automated to a considerable
extent.
A novel mechanism for operating battery energy storage system in real-time
market with frequency linked pricing and having an increasing penetration of wind
power, is presented in Chapter 6. Simulations carried out on an test system with wind
power generation show the impact of increasing wind penetration on frequency and real
time price due to both high variability and forecast error. It was observed that increased
wind penetration resulted in higher fluctuations in frequency and real-time price. Worst
cases of forecast errors were simulated and results show that during peak periods, real-
time price of energy is excessively high and during off-peak periods it can be fairly low.
A model for price-based control of BESS is conceived, in which charge and discharge
process is separate and SOC limit is implemented. Results of simulation on an isolated
area example system show that better control of frequency can be achieved using price-
based control of BESS. High real-time price due to wind forecast errors is also brought
down considerably. Price-based operation of BESS delivers higher operating revenues by
selling energy at peak prices and reduces operating costs by buying energy at minimum
Chapter 9 163

prices. The study done in this chapter shows that by employing frequency linked pricing
mechanism, the commercial viability of energy storage devices will increase.
Since in the competitive environment the power system is operated near to its full
capacity, where one or more physical limits can be violated, the active and reactive spot
prices can have drastic variations under such conditions and can lead to market
inefficiency. The potential role of the FACTS devices under such conditions have been
investigated in Chapter 7 and 8.
In Chapter 7, mixed integer nonlinear programming based approach has been
proposed for optimal placement of FACTS controllers and their potential role in
determination of active and reactive power marginal prices has been studied. The cost of
FACTS controllers have also been considered to obtain the accurate impact on price
signals. The marginal price of both active and reactive power improves with the optimal
placement of SVC, however considerable improvement in the reactive power marginal
price has been obtained with SVC. As the number of SVCs is increased to three, the
impact on marginal prices also improves. With the optimal placement of TCSC and
TCPAR in the system, significant improvement in active power marginal price has been
observed, however there is no significant change in reactive power marginal price.
In Chapter 8, a two step optimization model for determining active and reactive
marginal prices at maximum loadability point of the system is presented. This model can
also take into account the presence of power flow controllers like UPFC and ST. The role
of optimally located UPFC and ST has been studied on the control of the marginal prices.
The study has been conducted on the two IEEE test systems of 14 and 57-bus for a pool
market model. From the study, the following conclusions have been made:
• The loadability factor increases in the presence of both UPFC and ST. In the case
of 57-bus test system, the loadability has also been determined with the optimally
placed multiple controllers and with the two UPFC and ST the loadability
obtained with ST is found to be comparable that of obtained using UPFC. More
number of ST can be deployed in the system to enhance system loadability as well
as control of price variations due to their low cost. However, more than one UPFC
in the system is not economically justifiable.
• At the maximum loading point of the system, it has been observed that there is
drastic increase and variations in the marginal prices of both real and reactive
power and these prices are high as compared to the prices at base case.
Chapter 9 164

• In the presence of optimally located UPFC and ST, a reduction in the marginal
prices bringing them very near to the base case values, has been observed and the
performance of the ST is found to be comparable with that of UPFC.
It has been observed from the present study that the performance of ST is comparable to
that of UPFC in enhancing loadability as well as control of real and reactive power
marginal prices at each bus. Due to the low cost of ST which is comparable to that of
phase angle regulator, this device can provide more promising economic solutions under
steady state condition in the present open access market scenario.

9.2 Main contributions of the thesis

Following are the main contributions of present thesis work:
• Study and analysis of the performance of UI mechanism in Indian grids in terms
of promoting economic dispatch, real-time trading, and frequency regulation.
• A new frequency regulation mechanism based on frequency-linked pricing for
competitive electricity markets has been proposed.
• The performance of proposed mechanism in terms of frequency regulation and
ease of settlement has been studied and analysed for a variety of system
conditions.
• The application of frequency linked real-time pricing for dynamic demand
control, enabling the demand side to participate in frequency regulation, has been
demonstrated.
• The application of frequency linked real-time pricing for regulating frequency in
markets with high penetration of wind power is demonstrated.
• A mechanism for price-based control of generation has been proposed.
• A mechanism for frequency based control of air-conditioning load for demand-
side management has been proposed.
• A mechanism for operation and control of BESS using frequency linked pricing
has also been proposed.
Some other contributions made in the present work are:
• Study of the impact of various types of FACTS controllers on fluctuations in the
spot price of active and reactive power in a pool electricity market.
Chapter 9 165

• Comparison of the performance of two power flow control devices viz. UPFC and
ST in terms of impact on spot price of active and reactive power and loadability
enhancement in pool electricity markets.

9.3 Future Scope of Work

The work presented in this thesis is one of the fundamental work done in the area of price
based frequency regulation. This issue is a new area and there are tremendous
opportunities for further investigations in this area. Throughout this work, Gencos and
Discos have been assumed to apply priced based control measures honestly, based on
their marginal cost or benefit. However, in practical situations all market entities would
operate on the premise of maximizing their profit. The impact of profit maximizing
controls on the stability of market should be investigated further. Also, we have assumed
the whole of electricity market to be a single super control area. The tie-line deviations
between distinct control entities within this super-area have been allowed, as such
deviations will be priced according to the prevailing real-time prices. However, in case of
interchange between neighbouring countries the such assumption may not hold true.
Additionally, if the flow on inter area tie lines exceed the allowable limits in real time, a
mechanism for handling real-time congestion would also be required.
Under the proposed mechanism, Gencos and Discos would be continuously
tracking the frequency deviations through price based controls. These control action
would certainly result in some wear and tear of equipment and switching elements. A
comparison of cost of this wear and tear and the benefits accrued from operating in the
real-time market also needs to be investigated in future. Another area for future work
would be the implementation of frequency based thermostat controllers on appliances.
Standardization of such technologies would be essential for widespread acceptance of
these appliances by industry and consumers. Similar standardization efforts would also be
required for distributed generation and energy storage technologies for controlling their
operation in real time markets.
References 166

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Appendix 177

Appendix

IEEE 14 Bus System Data

MVA Base = 100 MVA

kV Base = 138 kV
Bus Data
Bus No. Pd (MW) Qd (MVar) Vmax (p.u.) Vmin(p.u.)
1 0 0 1.06 0.94
2 21.7 12.7 1.06 0.94
3 94.2 19 1.06 0.94
4 47.8 23.9 1.06 0.94
5 57.6 21.8 1.06 0.94
6 11.2 7.5 1.06 0.94
7 25 10 1.06 0.94
8 25 10 1.06 0.94
9 29.5 16.6 1.06 0.94
10 29 15.8 1.06 0.94
11 23.5 11.8 1.06 0.94
12 6.1 1.6 1.06 0.94
13 13.5 5.8 1.06 0.94
14 14.9 5.6 1.06 0.94

Generator Data
Bus No. Pgmax(MW) Pgmin(MW) Qgmax(MVar) Qgmin(MVar)
1 250 0 250 -250
2 200 0 200 -200
3 60 0 60 -60
6 50 0 50 -50
8 60 0 60 -60
Appendix 178

Line Data
From Bus To Bus r (p.u.) x (p.u.) b (p.u.) Smax (MVA)
No. No.
1 2 0.01938 0.05917 0.0528 200
1 5 0.05403 0.22304 0.0492 100
2 3 0.04699 0.19797 0.0438 100
2 4 0.05811 0.17632 0 100
2 5 0.05695 0.17388 0.034 100
3 4 0.06701 0.17103 0.0346 100
4 5 0.01335 0.04211 0.0128 100
4 7 0 0.2045 0 100
4 9 0 0.5389 0 100
5 6 0 0.2349 0 100
6 11 0.09498 0.1989 0 100
6 12 0.12291 0.25581 0 100
6 13 0.06615 0.13027 0 100
7 8 0 0.17615 0 100
7 9 0 0.11001 0 100
9 10 0.03181 0.0845 0 100
9 14 0.12711 0.27038 0 100
10 11 0.08205 0.19207 0 100
12 13 0.22092 0.19988 0 100
13 14 0.17093 0.34802 0 100

IEEE 57 Bus System Data

MVA Base = 100 MVA

kV Base = 138 kV
Bus Data
Bus No. Pd (MW) Qd (MVar) Vmax (p.u.) Vmin(p.u.)
1 55 17 1.06 0.94
2 3 88 1.06 0.94
3 41 21 1.06 0.94
Appendix 179

4 0 0 1.06 0.94
5 13 4 1.06 0.94
6 75 2 1.06 0.94
7 0 0 1.06 0.94
8 150 22 1.06 0.94
9 121 26 1.06 0.94
10 5 2 1.06 0.94
11 0 0 1.06 0.94
12 377 24 1.06 0.94
13 18 2.3 1.06 0.94
14 10.5 5.3 1.06 0.94
15 22 5 1.06 0.94
16 43 3 1.06 0.94
17 42 8 1.06 0.94
18 27.2 9.8 1.06 0.94
19 3.3 0.6 1.06 0.94
20 2.3 1 1.06 0.94
21 0 0 1.06 0.94
22 0 0 1.06 0.94
23 6.3 2.1 1.06 0.94
24 0 0 1.06 0.94
25 6.3 3.2 1.06 0.94
26 0 0 1.06 0.94
27 9.3 0.5 1.06 0.94
28 4.6 2.3 1.06 0.94
29 17 2.6 1.06 0.94
30 3.6 1.8 1.06 0.94
31 5.8 2.9 1.06 0.94
32 1.6 0.8 1.06 0.94
33 3.8 1.9 1.06 0.94
34 0 0 1.06 0.94
35 6 3 1.06 0.94
Appendix 180

36 0 0 1.06 0.94
37 0 0 1.06 0.94
38 14 7 1.06 0.94
39 0 0 1.06 0.94
40 0 0 1.06 0.94
41 6.3 3 1.06 0.94
42 7.1 4.4 1.06 0.94
43 2 1 1.06 0.94
44 12 1.8 1.06 0.94
45 0 0 1.06 0.94
46 0 0 1.06 0.94
47 29.7 11.6 1.06 0.94
48 0 0 1.06 0.94
49 18 8.5 1.06 0.94
50 21 10.5 1.06 0.94
51 18 5.3 1.06 0.94
52 4.9 2.2 1.06 0.94
53 20 10 1.06 0.94
54 4.1 1.4 1.06 0.94
55 6.8 3.4 1.06 0.94
56 7.6 2.2 1.06 0.94
57 6.7 2 1.06 0.94

Generator Data
Bus No. Pgmax(MW) Pgmin(MW) Qgmax(MVar) Qgmin(MVar)
1 575.88 0 300 -200
2 100 0 50 -17
3 140 0 60 -10
6 100 0 25 -8
8 550 0 200 -140
9 100 0 9 -3
12 410 0 155 -150
Appendix 181

Line Data
From Bus To Bus r (p.u.) x (p.u.) b (p.u.) Smax (MVA)
No. No.
1 2 0.0083 0.028 0.129 200
2 3 0.0298 0.085 0.0818 100
3 4 0.0112 0.0366 0.038 100
4 5 0.0625 0.132 0.0258 100
4 6 0.043 0.148 0.0348 100
6 7 0.02 0.102 0.0276 100
6 8 0.0339 0.173 0.047 100
8 9 0.0099 0.0505 0.0548 200
9 10 0.0369 0.1679 0.044 100
9 11 0.0258 0.0848 0.0218 100
9 12 0.0648 0.295 0.0772 100
9 13 0.0481 0.158 0.0406 100
13 14 0.0132 0.0434 0.011 100
13 15 0.0269 0.0869 0.023 100
1 15 0.0178 0.091 0.0988 200
1 16 0.0454 0.206 0.0546 100
1 17 0.0238 0.108 0.0286 200
3 15 0.0162 0.053 0.0544 100
4 18 0 0.555 0 100
4 18 0 0.43 0 100
5 6 0.0302 0.0641 0.0124 100
7 8 0.0139 0.0712 0.0194 100
10 12 0.0277 0.1262 0.0328 100
11 13 0.0223 0.0732 0.0188 100
12 13 0.0178 0.058 0.0604 100
12 16 0.018 0.0813 0.0216 100
12 17 0.0397 0.179 0.0476 100
14 15 0.0171 0.0547 0.0148 100
Appendix 182

18 19 0.461 0.685 0 100

19 20 0.283 0.434 0 100
21 20 0 0.7767 0 100
21 22 0.0736 0.117 0 100
22 23 0.0099 0.0152 0 100
23 24 0.166 0.256 0.0084 100
24 25 0 1.182 0 100
24 25 0 1.23 0 100
24 26 0 0.0473 0 100
26 27 0.165 0.254 0 100
27 28 0.0618 0.0954 0 100
28 29 0.0418 0.0587 0 100
7 29 0 0.0648 0 100
25 30 0.135 0.202 0 100
30 31 0.326 0.497 0 100
31 32 0.507 0.755 0 100
32 33 0.0392 0.036 0 100
34 32 0 0.953 0 100
34 35 0.052 0.078 0.0032 100
35 36 0.043 0.0537 0.0016 100
36 37 0.029 0.0366 0 100
37 38 0.0651 0.1009 0.002 100
37 39 0.0239 0.0379 0 100
36 40 0.03 0.0466 0 100
22 38 0.0192 0.0295 0 100
11 41 0 0.749 0 100
41 42 0.207 0.352 0 100
41 43 0 0.412 0 100
38 44 0.0289 0.0585 0.002 100
15 45 0 0.1042 0 100
14 46 0 0.0735 0 100
46 47 0.023 0.068 0.0032 100
Appendix 183

47 48 0.0182 0.0233 0 100

48 49 0.0834 0.129 0.0048 100
49 50 0.0801 0.128 0 100
50 51 0.1386 0.22 0 100
10 51 0 0.0712 0 100
13 49 0 0.191 0 100
29 52 0.1442 0.187 0 100
52 53 0.0762 0.0984 0 100
53 54 0.1878 0.232 0 100
54 55 0.1732 0.2265 0 100
11 43 0 0.153 0 100
44 45 0.0624 0.1242 0.004 100
40 56 0 1.195 0 100
56 41 0.553 0.549 0 100
56 42 0.2125 0.354 0 100
39 57 0 1.355 0 100
57 56 0.174 0.26 0 100
38 49 0.115 0.177 0.006 100
38 48 0.0312 0.0482 0 100
9 55 0 0.1205 0 100
 184

Publications
[1] Saurabh Chanana and Ashwani Kumar, “Economic load dispatch under ABT
regime”, National Power System Conference NPSC 2004, IIT Madras, December
26-30, 2004.

[2] Saurabh Chanana and Ashwani Kumar, “Influence of optimally located FACTS
devices on active and reactive power price in pool and hybrid markets”,
International Seminar and Tutorial on Power Transmission-Research Interest and
Challenges, CPRI Bangalore, Dec 20-22, 2005.

[3] Saurabh Chanana and Ashwani Kumar, “Effect of optimally located FACTS
devices on active and reactive power price in deregulated markets”, 2006 IEEE
Power India Conference, New Delhi, April 10-12, 2006.

[4] Saurabh Chanana and Ashwani Kumar, “Comparison of Unified Power Flow
Controller and Sen Transformer on spot price variation of real and reactive power
under maximum loadability condition”, Electric Power Components and Systems,
Vol. 36, pp. 1369-1387, Dec 2008..

[5] Saurabh Chanana and Ashwani Kumar, “Proposal for a Real-time Market based
on Indian Experience of Frequency Linked Prices”, Proc. of IEEE Energy 2030
‘IEEE Conference on Global Sustainable Energy Infrastructure’, Atlanta, USA,
Nov 17-18, 2008.

[6] Saurabh Chanana and Ashwani Kumar, “Influence of Optimally Located FACTS
Devices on Active and Reactive Power Marginal Price in Pool and Hybrid
Markets”, CBIP Water and Energy Research Digest, Vol. 20, No. 1, pp. 21-24,
Jan 2010.

[7] Saurabh Chanana and Ashwani Kumar, “Demand Response by Dynamic Demand
Control using Frequency Linked Real-time Prices”, International Journal of
Energy Sector Management, Vol. 4. No. 1, pp.44-58, Mar. 2010.

[8] Saurabh Chanana and Ashwani Kumar, “A price based automatic generation
control using unscheduled interchange price signals in Indian electricity system”,
International Journal of Engineering, Science and Technology, Vol. 2, No. 2, pp.
23-30, 2010.

[9] Saurabh Chanana and Ashwani Kumar, “Operation and Control of BESS using
Frequency-linked Pricing in Real-time Market with High Wind Penetration”,
accepted for publication in International Journal of Energy Sector Management,
Emerald.