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Economic Dispatch in power systems

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DOI: 10.1109/IEEEGCC.2015.7060068

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 Proceedings of the 8th IEEE GCC Conference and Exhibition, Muscat, Oman, 1-4 February, 2015

Economic Dispatch in Power Systems

A comparison between vertically integrated and libralized markets

F. N. Al Farsi, M. H. Albadi, N. Hosseinzadeh, A. H. Al Badi

Department of Electrical and Computer Engineering, Sultan Qaboos University, POBox33, Muscat 123, Sultanate of Oman
m065416@student.squ.edu.om

Abstract—Economic Dispatch is an important optimization
problem in power system planning. This article presents an
overview of the economic dispatch problem, its formulation,
and a comparison of addressing the problem between the
vertically integrated market and the liberalized market
environments.
Keywords—Econmic Dispatch; Dispatch Centre; Vertically
Integrated Markets; Libralized Marekts
I. INTRODUCTION
Consider a system consists of N generating units serving
an electrical load as shown in Fig. 1. In this system there are
multiple types of fuel input used to operate the power plant
e.g. (Hydro, Gas, Steam, Diesel, Nuclear, Coal, Solar,
Wind… etc.). Knowing that the power systems should be
operated under a high degree of economy so that the system
will be operated at minimum cost; therefore the economic
dispatch concept will tell how much should be the output of
each generator so that the total operating cost is minimized.
Fig. 1. N Generating Units Serving an Electrical Load [1]
II. ECONOMIC DISPATCH FORMULATION
A. Economic Dispatch Definition
The purpose of the economic dispatch is to schedule the
outputs of all available generation units in the power system
such that the fuel cost is minimized while system constraints
are satisfied. Also it can be explained as the process of
allocating generation among the committed units such that
allowed to vary within certain limits so that it can meet the
demand with minimum fuel cost. This is called the optimal
power flow. The optimal power flow is used to optimize the
power flow solution of large scale power system. This is
done by minimizing selected objective functions while
maintaining an acceptable system performance in terms of
generators capability limits and the output of the
compensating devices [1].
It is useful to divide economic dispatch practices in two
separate stages: unit commitment and unit dispatch. Unit
commitment takes place before real-time operation and
determines the set of generating units that will be available
for dispatch. Unit dispatch occurs in real time and determines
the amount of generation needed from each available unit
[2].
B. Objective of the Power Economic Dispatch
The Main objective of the power economic dispatch is to
find the total power generation output so as to minimize
operating cost. Beside the main objective, there are also
numbers of objectives listed as follows:
• To schedule the committed generating units outputs
so as to meet the required load demand at minimum
operating cost while satisfying all units and system
equality and inequality constraints [3].
• Minimization of the emissions (the gaseous
emission such as SO2, NOx, CO and CO2 produced
by thermal power plants) ;
• Maximization of the profit by reducing the total
cost.
• Maintain System Stability and Security Constraint.
Economic Dispatch Mathematical formulation

The objective function of an ED problem is to:

• Minimize
 = ∑
 (
 ) (1)
the constraints imposed are satisfied and the energy
requirements are minimized.
Furthermore, the economic power dispatch for where usually the operating cost of each generator when
interconnected power system can be explained as the process generating a specific output power is modeled as
of finding the total real and reactive power schedule of each •
 (
 ) =  + 
 + 
 (2)
power plant in such a way as to minimize the operating cost.
This means that the generator’s real and reactive power is

978-4799-8422-0/15/$31.00©2015 IEEE
 Proceedings of the 8th IEEE GCC Conference and Exhibition, Muscat, Oman, 1-4 February, 2015

•  ,    represent the cost
Some units have limited fuel

coefficients of the jth generating unit.
Fuel must be burn in a specified
•
 (
 ) represents the cost function of the time
jth generating unit (in $/h),
Type of fuel
•
 represents the real output of the jth • Generator Location (criteria to be selected
generating units (in MW), during design stage)

•  is the total number of generators in the • Generation Limit

power system.
1 " <
 <
134 , (5 = 1, … … . . ,  ) (6)
This main objective is subject to a number of constraints.
Theses constraints are classified into two categories as

Unit ramp rates within the range of
follows:
production levels (e.g., the time it takes to
1) GENERATION CONSTRAINTS: move from one production level to another
while respecting the turbine’s safe thermal
• System constraints gradients);


∑
 =
 +
 (3) i) If power generation increases

 −
$ ≤ 8( (7)
Where the Transmission Line Losses equation is equal to
ii) If power generation decreases
  = ∑"# ∑"
 ! 
 + ∑" ! $
 + !$$ (4)

$ −
 ≤ 9( (8)

!  :- is the jth element of the
loss coefficient square matrix,
Where
$ (inMW) is the previous

! $ :- is the ith element of the
loss coefficient vector, output power and 8( (in MW/h) is
the up-ramp limit of the jth generator;

B$$ :- is the loss coefficient and 9( (in MW/h) is the down-ramp
constant limit of the jth generator.
• Spinning Reserve Requirement
∑" &  ≥ &( , ) = 1,2, … … . ,  (5)
Prohibited Operated Zone (normally will


& is the spinning reserve be given by the manufacturer)
contribution of unit I during the In the actual power system, the load
time interval t; demand of a power system must avoid the

SR0 is the system spinning reserve prohibited zones. Thus, if the constraint in
requirement for interval t; (1) is taken into account, the feasible
operating zones of the jth generating unit
• Thermal Unit Constraints [4] can be as follows

Minimum up time: once the unit

1 " ≤
 ≤
,
:
(9)
is running, it should not be turned
= :
off immediately.

,;< ≤
 ≤
,; ,>=
2,3, … … . , 

Minimum down time: once the
unit is decommitted, there is a (10)
minimum time before it can be

,=" ≤
 ≤
134 (11)
@
recommitted.
: =
• Must Run Units Constraints [4] where
,; and
,; are the lower and upper
bound of the jth prohibited zone of the jth
In some cases, some units must generating unit, and  is the number of
remain online for voltage support prohibited zones of the jth generating unit. In the
requirements. Others might be needed actual power system, the load demand of a
to produce steam for water purpose or power system must avoid the prohibited zones.
to use the steam on the plant itself.
• Fuel Constraint [4]
 Proceedings of the 8th IEEE GCC Conference and Exhibition, Muscat, Oman, 1-4 February, 2015
2) TRANSMISSION NETWORK CONSTRAINTS
• Network Security Constraint (Voltage
limit Constraints (+/- 10%) [applicable for
both 132 kV and 220 kV System]
• Line capacities under different power
flows and loadings;

:134 ≤
: ≤
:134 A = 1,2, … … . . , A (12)


: is the active power flow
through transmission line l during
the interval t;


:134 is the upper limit on the
active power flow along line l
III. COMPARISON BETWEEN VERTICALLY
INTEGRATED POWER SYSTEMS AND LIBERALIZED
ELECTRICITY MARKET
There are two approaches currently existing for providing
electricity to the end user. The first one is the vertically
integrated market and the second one is the liberalized
market or competitive market.
A. Vertically Integrated Market
Vertically Integrated Market means that the generation,
transmission and distribution belongs to a simple owner e.g.
(Government) [5]. Fig. 2 is an example of a vertically
integrated market where a single agency or company is
responsible for generating, transmitting and distributing the
power to the end user.
Fig. 2. Vertically Integrated Organization [6]
In this model, the provider does not have to compete to
provide the electricity to the customer with low cost and
high quality as there are no other competitors in the market.
Sometimes the provider is asked by the government to meet
the projected goals which can end up in dispatching the
power in inefficient way [4].
1) Advantages of the Vertically Integrated Power
System
The advantages of the Vertically Integrated Power System
(VIPS) are its simplicity and certainty. A single integrated
utility does not require complicated systems to dispatch the
power to multiple providers at the wholesale level, or retail
market platforms that allow for switching of customers
between different retail providers. In the vertically
integrated power system the incentives for innovation are
generally considered to be weak, unless governments are
particularly involved in supporting researches and
development section in areas of dispatching the power in an
economic and efficient way.
2) Example of Dispatch Procedure in the Vertically
Integrated Market
In sultanate of Oman, The Load Dispatch Centre (LDC)
from Oman Electricity Transmission Company (OETC) is
responsible to dispatch the power in the main interconnected
system network in Oman. The way that the LDC is using in
dispatching the power is an example of the vertically
integrated market. First of all, the LDC department in OETC
creates Day-Ahead Load Forecast, based on Data received
from consumers (distribution companies and directly
connected customers), weather forecasts and Day ahead
units availability form all Independent Power Producers.
LDC uses these three main inputs to run unit-commitment
optimization computer programs to get the optimal dispatch
scenarios for the next day forecast before the real
operations. The computer programs take as inputs all the
information on the characteristics of the individual
generating units that are ready to provide electricity on the
following day. These characteristics include current unit
status, minimum and maximum output levels, ramp rate
limits, start-up and shutdown costs, minimum runtimes, and
unit fuel costs at various output levels. Moreover, the
operations planner inputs to the model the utility’s day-
ahead forecast loads, hour by hour. Finally, the inputs
include details on the characteristics of the transmission
system expected for the operating day (in particular, any
lines or transformers out of service for maintenance).
The optimization model is then run with all these inputs in
order to identify the least cost solution to meet the following
day’s electricity demands while maintaining system
constraints. The reliability requirements are the ability to
withstand the loss of any single generation or transmission
element while maintaining normal system operation. The
optimization model performs functions in its search for a
least-cost solution.
Once generators are committed (turned on and synchronized
to the grid), they are ready to provide power to meet
customer loads and reliability requirements. The provisional
running orders for day a head planning used as a guide line
for control engineer. However, during the real time
operation the control engineer in the LDC decides how
much additional (or less) generation is required during the
 Proceedings of the 8th IEEE GCC Conference and Exhibition, Muscat, Oman, 1-4 February, 2015
next interval to meet system requirements. The action taken
by the control engineer in LDC during the real time
operation is to meet the load demand while maintaining all
the system constraints of each generator.
The control engineer during the real time operation has the
authority to decide whether to turn a unit on or not (the unit-
commitment decision), based on the load requirement while
maintain all system constrains and security.
To follow minute-to-minute variations in load, the control
engineer will monitor the system and he will give
instruction to increase or decrease the power to the power
generation unit’s operators.
B. Libralized Market
The objective of the liberalized market is to achieve
higher energy efficiency and lower consumer price and this
can be done by introducing the commercial competition [7].
Liberalization of the electricity market is proposed as an
effective solution in dispatching the power in an economic
and efficient way and this is because the liberalization of the
electricity market forces the breaking of the electric power
industry into competitive and regulated activities. However,
the interaction between participants becomes more and more
complex (Fig. 3) and information volume increases so that
an appropriate information system for decision support is
required [8].
Introducing competition in generation and marketing means
allowing multiple parties to compete to provide electricity to
customers in a given area. Integrated Market means that the
generation, transmission and distribution belongs to a simple
owner e.g. (Government) [5].
Fig. 3. New Electric Energy Landscape [6]
In the liberalized market the whole sale market platform is
organized in such a way where generators can offer their
supply at a specific given price. The cheapest power is
procured first and this allows for the prices to be set
reflecting the conditions of the supply and demand at that
time. In addition to the parties that own the generation,
transmission and distribution infrastructure, there are other
parties that enter the market as marketers or retailers of
electricity. This involves procuring electricity on wholesale
markets and billing the end user customers. Marketers seek
to acquire more customers and this can be done by proving
the electricity with lower prices and good quality [9].
1) Advantages of the Liberalized Market
The main advantage of the liberalized market or the
competitive market is generally addressing the shortcomings
of the vertically integrated model in terms of poor
efficiency, lack of innovation and too high prices. Where
provider must compete to provide generation and marketing
services otherwise their investment will be at risk and they
will end up in running their units inefficiently. As a result of
competition between multiple providers, customers
generally see a more responsive service as well as a less
costly means of supply. It should be noted that the price of
electricity does not necessarily reduces in all situations
under a liberalized electricity market structure. The
electricity price just responds to the market conditions, so it
may decrease or increase based on the conditions. For
example, if the price of fuel is increased hence the prices for
electricity will also increase regardless of the supply model
adopted [8].
2) Example of Dispatch Procedure in the Liberalized
Market
System Components
The overall procedures in the liberalized market at New
York Independent System Operator (NYISO) “Bid-to-Bill”
Process [10] from the time Bids are received to the time that
payments are made consists of the following major Points:
• Bid/Post System
• Day-Ahead Subsystem
• Real-Time Scheduling (RTS) Subsystem

Real-Time Commitment (RTC)

Real-Time Dispatch (RTD)
• Settlement Subsystem
Bid/Post System
The purpose of the Bid/Post System is to:
• Accept generator and load bids
• Post the public results of the Real Time Dispatch
(RTD), the Day-Ahead Market and the Real Time
Commitment (RTC).
Day-Ahead Scheduling Subsystem
The Day-Ahead scheduling procedures consist of the
following:
• Compile all the day-ahead transmission outages (if
any); update transfer capabilities of the
Transmission Lines, its constraints and the security
constrained unit commitment (SCUC) model; post
updated total transmission line capability.
 Proceedings of the 8th IEEE GCC Conference and Exhibition, Muscat, Oman, 1-4 February, 2015

• Create Day-Ahead Load Forecast, based on

weather forecasts and the load forecast model.
• Prepare SCUC and scheduling.
• Schedule and evaluate all the non-firm
transactions; in the case of no congestion, the non-
firm transactions are tabulated in sequence up to
the available transfer capabilities of the
transmission system.
• Prepare automated mitigation of generator offers.

Real-Time Scheduling Subsystem

To make sure that the schedules meet all of the reliability
requirements almost every fifteen minutes, a Real-Time
Commitment (RTC) evaluation is performed. By using the
Real Time Commitment (RTC) program the Real-Time
transaction is evaluated independently tacking in
consideration the Day-Ahead transactions and Generator
Bids. Any new External Transactions it will be scheduled by
RTC program, which could displace some of the Day-Ahead
non-firm transactions. If required, 10 and 30-minute
resources will also be scheduled. The results are then
announced every 15 minutes.
Almost every 5 minutes, the Real-Time Dispatch (RTD)
uses Bid curves of the generators to dispatch the system to
meet the load while tacking in consideration the
transmission constraints.
Fig. 4. NYISO Bill to Bid Process [10]
Settlement Subsystem
During each hour of operation, the results of SCUC, RTS
and Automatic Generation Control (AGC) are captured and
saved for later use by the Billing subsystem.Fig.4 shows the
procedures in the liberalized market Bill to Bid Process as
explained in above sections.

The sequence of events in the liberalized market for the

load dispatch (Locational Based Marginal Price Time Line)
LBMPs is shown in Fig.5.
Finalized bids must be submitted day-ahead by 05:00 a.m.
(or by 4:50 A.m.)[10].

By 11:00 a.m. on the day before to the Dispatch Day, the

ISO shall complete the Day-Ahead scheduling process and
announce on the Bid/Post System the Day-Ahead schedule.
Locational Based Marginal Prices (LBMPs) are posted on
the Bid/Post System as public data and commitment
schedules are announced on the Bid/Post System as private
data [10].
Bids may be left standing or withdrawn if not accepted.
Standing bids may be used in Supplemental Resource
Evaluation (SRE).
A reliability study is performed over the seven (7)-day
period that begins with the next Dispatch Day. This study
evaluates if resources with longer start-up times are required
to meet forecasted Load and reserve requirements. Units that
are committed are guaranteed a minimum generation bid cost
[10]. Fig. 5. Locational Based Marginal Prices Time Line [10]
 Proceedings of the 8th IEEE GCC Conference and Exhibition, Muscat, Oman, 1-4 February, 2015
IV. CONCLUSIONS
In this paper, an overview of the economic dispatch problem
was presented. The review included the problem
formulation as well as the objectives and constraints. A
standard mathematical formulation is presented. A
comparison between the economic dispatch problem in the
vertically integrated and the liberalized markets is
discussed. In the vertically integrated market, transmission
and distribution are owned by a single entity, e.g. the
government. In this model, the provider does not have to
compete to provide the electricity to the customer with low
cost and high quality as there are no other competitors in the
market. The advantages of the vertically integrated power
system are its simplicity and certainty. The disadvantage of
the vertically integrated power system is the incentives for
innovation are generally considered to be weak, unless
governments are particularly involved in supporting
researches and development section in areas of dispatching
the power in an economic and efficient way. On the other
hand, the liberalized market environment addresses the
shortcomings of the vertically integrated model in terms of
poor efficiency, lack of innovation and sometimes too high
prices. Energy provider must compete to provide power in
an efficient manner.
REFERENCES
[1] H. Saadat, “Power system analysis,” WCB/McGraw-Hill, 1999.
[2] United States Department of Energy, “The value of economic
dispatch- a report to congress pursuant to section 1234 of the energy
policy ACT of 2005,”.
[3] Coelho, L. Santos, and C. Lee, "Solving economic load dispatch
problems in power systems using chaotic and Gaussian particle
swarm optimization approaches," International Journal of Electrical
Power & Energy Systems, 2008, pp. 297-307.
[4] A. J. Wood, and B. F. Wollenberg, “Power generation, operation, and
control,” John Wiley & Sons, 1996.
[5] B. Gjorgiev, "Fuzzy-genetic optimization approach for generation
scheduling with system consisted of conventional and renewable
energy sources," PhD diss., Master’s thesis, 2010.
[6] T.Dang, and R. Chéramy, "Impacts of electricity market liberalization
on centralized generation and telecontrol infrastructure," 2006 IEEE
International Conference on Industrial Informatics, 16-18 Aug,
Singapore, 2006.
[7] A. Rong, and R. Lahdelma, "Optimal operation of combined heat and
power based power systems in liberalized power markets," 2013
avaiable at: http://www.eolss.net/sample-chapters/c05/E6-39-14-
00.pdf
[8] Darry Bigger, “The NEM at 30 – which reforms for the second fifteen
years of the Australian Electricity Market,” the 10th Conference on
European Energy Market, 27-31 May, Stockholm, Sweden, 2013.
[9] M. Baritaud, "Securing Power during the transition," Generation
investment and operation, 2012.
[10] New York Indepandent System Operator, “Day-Ahead Scheduling
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February 2013.
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Fahad N. Al Farsi received the B.Sc. degree in electrical
and computer engineering from Sultan Qaboos University,
Muscat, Oman in 2010.He is currently working in
WorleyParsons Oman as Electrical Engineer. He is
currently doing his master thesis in the area of power
economic dispatch at Sultan Qaboos University, Muscat,
Oman. His research interests include Power system operation and planning,
Power system economics, power system modeling and analysis and Power
Quality.
Mohammed H. Albadi received the B.Sc. degree in
electrical and computer engineering from Sultan Qaboos
University, Muscat, Oman in 2000; the M.Sc. degree in
electrical engineering from Aachen University of
Technology, Germany in 2003; the Ph.D. degree in
Electrical and Computer Engineering from University of
Waterloo, Canada in 2010. He is currently working as
Assistant Professor in the Electrical & Computer Engineering Department
at Sultan Qaboos University, Muscat, Oman. His research interests include
Renewable energy, Distributed Generation, Power Quality, Distribution
systems, Demand side management, Power system operation and planning,
and Power system economics. He is a Member of the Institute of Electrical
Engineering and Electronics, IEEE, USA.
Nasser Hosseinzadeh received a B.Sc. degree in
electrical engineering from Shiraz University in 1986, an
M.Sc. degree from Iran University of Science and
Technology in 1992, and a Ph.D. degree from Victoria
University Australia, in 1998. He is currently an Associate
Professor at Sultan Qaboos University in Oman, where he
is the Head of Department of Electrical and Computer Engineering. Earlier,
he was with Swinburne University of Technology, Australia, during 2008
to 2011, with Central Queensland University, Australia, from 2003 to 2008,
with Monash University Malaysia in 2002, and with Shiraz University from
1998 to 2001. His fields of interest include power system modeling and
analysis, renewable energy systems, applications of intelligent control in
power engineering, smart grids, and engineering education. He is a Senior
Member of the Institute of Electrical Engineering and Electronics, IEEE,
USA.
Abdullah H. Al-Badi obtained the degree of B.Sc. in
Electrical Engineering from Sultan Qaboos University,
Oman, in 1991. He received the degree of M.Sc. and Ph.D
from UMIST, UK, in 1993 and 1998 respectively. In
September 1991, he joined the Sultan Qaboos University
as demonstrator and, in 1998, he became an Assistant
Professor. Currently he is a Professor at the department of
electrical and computer engineering and the Dean of the College of
Engineering. He has published several papers in International Journals and
Conferences in the field of electrical machines, drives, interference and
high voltage. He carried out several projects on the effect of AC
interferences on pipelines. He is a Senior Member of the Institute of
Electrical Engineering and Electronics, IEEE, USA.