Incorporating Endogenous Electricity Demand to Simulate Power System Development: the Case of Tanzania

Rhonda Jordan
Engineering Systems Division, MIT Building E40-252, 77 Massachusetts Avenue, Cambridge, MA 02139-4307 rjordan@mit.edu Abstract This paper describes the development of an integrated simulation model that captures the interplay between social and technical factors in the electric power system. The model demonstrates an interdisciplinary approach to simulating the technical details of power grid operation and endogenous electricity demand dynamics that result from social processes of technology diffusion. The model is used to simulate electric power system development and performance in the United Republic of Tanzania. Finally, this paper presents future research plans to utilize this holistic representation of the power system to demonstrate the importance of incorporating electricity demand dynamics into capacity expansion and electrification planning models. Keywords: electricity, Africa, system dynamics, optimization 1. Introduction quantitative models, and researchers have used modeling to explore policy questions for decades. The literature includes a rich collection of models that address a variety of energy policy concerns for developed countries, including capacity expansion, improvement of operational performance, and the impact of fuel/technology mix on system performance [4]. These models represent the technical details and physical laws of electric power systems. However, such optimization planning models assume that electricity demand is an exogenous variable and, in the context of a developing country, this assumption may not be appropriate. The effect of word of mouth on technological diffusion and the heavy reliance on kerosene, batteries and other more affordable off-grid sources of energy make forecasting the demand for electricity extremely difficult [5], [6]. System dynamics models have, in the past, incorporated such social factors and represented electricity demand in developing countries as an endogenous variable. These models, however, lack the detailed representation of the power network, which is critical in planning and assessing capacity expansion needs [6]. The use of (i) optimization models that represent the electric power grid but do not represent the complex dynamics of consumer demand in developing countries or (ii) simulation models that represent endogenous consumer dynamics but not the operation of the power grid may provide misleading results when used to inform planning and policy. Thus, this paper describes the development of a simulation model that captures both the technical details of electric power grid operation as well as electricity demand dynamics in developing countries. The simulation model is built and applied to the electric power system in Tanzania over a 10 year time horizon. Section 2 describes the critical components of the simulation model developed in this research and the software platform used for implementation. Section 3 discusses preliminary results and future research plans. The paper concludes with the expected contributions of this research.

One quarter of the worlds population lives without electricity. In Africa alone, there are more than 500 million without access to modern energy services [1]. The range of impacts that electricity could have on their livelihoods is tremendous, and, while there is still debate surrounding the causal relationship between the provision of electricity and economic growth, access to electricity is agreed to be a necessary but not sufficient condition for economic development [2]. As a result, national goals in most developing countries include improving and expanding the power system. Power sector efforts in developing countries are broadly aimed at (1) increasing access to modern energy services and (2) improving the basic attributes of grid supply. These are common challenges faced around the world, but truly achieving national targets with respect to these efforts is a complex problem, due to factors such as large-scale poverty and urbanization, limited resources, antiquated infrastructure, and elastic demand for electricity [2], [3]. Investment decisions made within electric power systems have typically been informed by the use of

2.

Model Framework

This model simulates power system performance for a single year by calling each of three critical modules once. It takes as input policies and investment decisions, and it generates various indicators (over time) that are of interest to stakeholders in the electric power sector, including but not limited to the number of grid and off-grid customers, grid operational costs, grid demand and consumption, power company cash flow, and grid reliability1. Figure 1 depicts the flow of information between modules.

without Electricity and (iii) the Total Population; using this information, the Bass Diffusion model [7] is employed in equation 1 to determine the number of new households adopting electricity each year / --[1]

where c is the contact rate of households, i is infectivity (ie the probability that an interaction will result in electricity adoption), A is the stock of customers who have already adopted electricity, P is the stock of potential adopters of electricity, and N represents the total number of households in the region. The Residential Attractiveness & Market Share block determines the indicated market share of each of the electricity options; it uses a logit choice function to determine the fraction of electricity adopters choosing to connect to the grid, a single-user diesel generator, or a PV solar home system. This subsystem takes as input: (i) grid reliability (ii) grid backlog ratio (the ratio of desired grid connections to the capacity of the power company to connect new customers), (iii) grid connection subsidy (if one exists) and (iv) the per unit energy price paid by customers. Indicated share is determined as follows:

Adoption & Customer Allocation

Electricity Demand Profiles Feedbacks

Power Grid Operation

Figure 1. Simulation Model Diagram The following subsections provide brief descriptions of each of the three major simulation modules: (1) Regional Adoption & Customer Allocation (2) Electricity Demand Profiles and (3) Power Grid Operation. 2.1 Regional Adoption & Customer Allocation This module takes as input industrial grid and offgrid consumption for the previous year, the number of residential grid, pv and diesel customers, the number of residential customers awaiting a grid connection, reliability of the power grid, the capacity of the power company to make new grid connections, and investments in electrification projects. The module determines the number of new residential customers adopting electricity, the number of new residential customers connected to the national power grid, and the number of residential customers purchasing PV systems or diesel systems. It also determines industrial grid and off-grid consumption. The module consists of 6 subsystems (also called blocks). The Population Growth block keeps track of regional population growth due to birth and death processes. The Adoption block captures residential customer dynamics of each major region in the country. The residential adoption block takes as input (i) Total Residential Households with Electricity (ii) Households
In this research, reliability is calculated as the ratio of served demand to total demand in the network. This is a simplification.
1

--[2] --[3]

where j is the factor impacting choice (capital cost, unit price, reliability, perceived backlog, quality of connection), i is the supply option, and Aij is the attractiveness of option i with respect to factor j. The Residential Customer Allocation & Backlog block keeps track of the stock of grid, diesel, PV, and off-grid customers. This subsystem takes as input: (i) electricity adopters (ii) indicated market share for each option and (iii) new electrification projects. Internally, the module will determine the number of grid connections that are made in the various regions in the country; this is based on the capacity of the electric utility (in this case, Tanesco) to perform new connections. (The capacity of Tanzanias electric utility to connect new customers is currently 100,000 per year) [8]. The customers who desire a grid connection but are not connected go into a backlog of customers awaiting a connection; it is assumed that they resort to kerosene and dry cell batteries to meet their electricity needs until they are connected. Industrial customers are treated as a separate population from the residential households. In 2008, Steel observed that the industrial customers in Kenya were extremely sensitive to grid reliability, there was the potential for them to switch multiple times between

Grid Connections

Res HH Grid Grid Connections from Diesel

HH Growth

Res HH No Elec

OffGrid Diesel Sales

Res HH OffGrid Diesel

Grid Connections from Renew

Using previously generated econometric studies and the electricity demand profile of new residential customers as described above, the total residential demand for grid power in a single year is estimated as follows: --[4] --[5]

OffGrid Renew Sales

Res HH OffGrid Renew

Figure 2. Basic Structure of Residential Allocation Model [6]2 electricity sources, and that these customers are likely to split their consumption between several sources [6]. This is assumed to be true in Tanzania and industrial consumers are modeled as units of energy instead of firms. The Industrial Choice block assumes no social dynamics and no questions of ability to pay. Growth in industrial electricity consumption is assumed to increase at the rate forecasted by the power system master plan of the electric utility; in Tanzania, industrial growth is proportional to the increase in mining activity over the next ten years [8]. The indicated market share of industrial consumption is determined as prescribed by equations 2 and 3 above; however those factors impacting the industrial decision to be supplied by either the grid, off-grid diesel generator, or off-grid renewable are capital cost, the unit price of electricity and reliability. The Industrial Allocation block keeps track of those energy units met by the grid, off-grid diesel, or off-grid hydro sources. 2.2 Electricity Demand Profiles Once regional adoption and customer allocation is determined for a single year, the energy units consumed by industrial consumers and the number of new and previously existing grid and off-grid customers is passed into this module to determine the total electricity demand profile of residential and industrial grid customers per region. Lacking individual household grid electricity consumption patterns for residents in Tanzania posed a challenge to predicting consumption patterns; however, historical data and numerous studies specific to Tanzania and the East African context were utilized to predict the electricity demand profile of both new and existing residential grid customers. The consumption of newly connected grid customers assumed to be 50kWh/month while existing grid customers consume 150kWh/month.

1 1 --[6] Where

year (ranging from 1 to 10) total grid demand in year t the aggregate electricity demand of customers connected in year t the aggregate electricity demand of existing grid customers in year t the number of new grid customers connected in year t the electricity demand profile of a newly connected grid customer the percent increase in electricity consumption of existing grid customers per the percent increase in GDP in year t the percent change in GDP in year t the aggregate grid demand observed in 2010.

Historical sales data for Tanzania is used to estimate industrial demand, and data on the introduction of new industrial and mining loads is used to predict the increase in industrial demand over time. To summarize, residential and industrial demand estimates are generated for each region of the country using the methods discussed above; this is then used to determine the demand at each node of the electric power network. This data is sent into the power grid operation module.

2.3 Power Grid Operation The power grid operation module was created using the General Algebraic Modeling System (GAMS). This module is a deterministic optimal power flow model (DC power flow) with block-wise unit commitment and network effects. The model minimizes total variable costs, while satisfying demand load balance constraints, meeting maximum and minimum production and flow constraints, and meeting startup, shutdown and unit commitment constraints. It takes as input the newly installed generation and

Renew indicates PV solar home systems.

transmission capacity and the grid demand profile to determine the power flow in each line of the transmission network as well as production by each generator during every period (grouping of months), day type, and load level for the year. This model determines total annual operational costs, network losses, annual electricity production and consumption, and total non-served energy (providing a crude measure of reliability). 2.4 Implementation One of the main goals of this research is to develop a system of modules (within a single simulation model) that illuminates the interactions among the actors and technical system operation within the electric power sector. In order to link the system dynamics subsystems that capture electricity adoption and changing electricity demand to the GAMS power grid model, Matlabs Simulink software was utilized. The Simulink environment uses icon-based modeling with an emphasis is on explicit mathematical representation of the relations among the system variables. Simulink has been used widely throughout academia to represent the coupled set of first-order differential equations because of its ease of use, versatility and large library of functions [9]. In order to call the power grid module from within Simulink, an Embedded MATLAB function block is used to make system calls to the GAMS model. 3. Results & Next Steps

0.75 0.7 0.65 0.6 0.55 0.5 0.45 0.4 0.35 1 Base 3 5 Subsidy 7 9 New Capacity

Figure 3. Grid reliability 2011 20203

1.8 1.6 1.4 1.2 1 0.8 1 Base 3 5 Subsidy 7 9 New Capacity

Figure 4. Annual grid demand (TWh) in the Tanzania power system 2011 20203

1550 1350 1150 950 750 550 350 150 0 2 Base- Grid Subsidy - Grid New Cap - Grid 4 6 8 10 Base - Off-Grid Subsidy - Off-Grid New Cap - Off-Grid

While the model has yet to be calibrated, preliminary model output demonstrates the potential need to incorporate endogenous electricity demand dynamics into planning models. Grid reliability, grid demand, the stock of grid customers, and the stock of off-grid customers with access to modern energy services were observed at the end of a 10 year time horizon after (1) offering residential customers a subsidy to connect to the national grid and (2) adding additional generating capacity in years 1 and 6. The same metrics were observed for a base case in which no policy is implemented and no investments were made. The figures below compare the output of the three cases. It is clear from Figure 3 that additional generating capacity coming online in years 1 and 6 improves the reliability of the grid, and offering a subsidy without adding generating capacity lowers reliability from the base case. However, when new capacity is added, the

Figure 5. Number of customers (000) in the Tanzania power system 2010 20203

3 Values depicted in this figure are not representative of true levels over the time horizon. Simulation output used to observe trends.

number of grid connections and demand is higher than that of the case where a grid connection subsidy is offered. This counterintuitive result is depicted in Figures 4 and 5. The subsidy is offered to customers but this particular policy doesnt force residents to connect to the grid; additionally, the lower reliability of the grid results in more residents choosing off off-grid sources of electricity. The next phase of research requires th the use of the simulation model described in this paper in conjunction with a decision analysis framework for long long-term strategy selection (such as capacity expansion or electrification planning). . A review of existing literature has exposed very few methods to address sequential decision-making making in this type of complex system, one characterized by large dimensionality and path dependence. However, in n order to determine the optimal investment strategy, ategy, two heuristic optimization methods will be implemented and tested. Once the decision analysis frameworks are incorporated, the importance of incorporating electricity demand dynamics (endogenous feedbacks) in capacity expansion and electrification planning will be determined. This is the focus of future research efforts. 4. Conclusion

The contributions of this work are many. However, there are limitations to the model developed. While each critical module of the model developed in this research has been created to incorporate enough detail such that important dynamics are observed, each can be built with fewer simplifying assumptions. For example, an agent-based based model representing electricity demand dynamics will offer higher spatial resolution that can be used as input to a power grid model that represents distribution istribution as well as generation and transmission. Additionally, as numerous markets are becoming liberalized around the world, a model representing a more competitive electricity sector in the context of a developing country will be useful. Nevertheless, s, this work will have both academic and applied contributions. References [1] United Nations Development Programme and World Health Organization. The Energy Access Situation in Developing Countries: A Review Focusing on the Least Developed Countries and Sub-Saharan Africa, UNDP and WHO, New York, 2009. [2] D. F. Barnes, The challenge of rural electrification: strategies for developing countries, countries Resources for the Future: Energy Sector Management Assistance Program, Washington, DC, 2007. [3] D. C. Brown, Electricity for Rural America: The fight for REA, Greenwood Press, Connecticut, 1980. [4] J. A. Momoh, Electric Power System Applications of Optimization, Marcel Dekker, Inc., Inc. New York, 2001. [5] R. Pandey, Energy Energy policy modeling: agenda for developing countries. Energy Policy 30, 2002, pp. 97106. [6] K. Steel, Energy Energy System Development in Africa: The case of grid and off-grid grid power in Kenya, Kenya PhD diss., Massachusetts Institute of Technology, Technology 2008. [7] J. Sterman, Business Dynamics: Systems Thinking and Modeling for a Complex World World McGrawHill/Irwin, 2000. [8] Tanzania Electric Supply Company Limited. Power System Master Plan: 2009 Update, Update SNCLavalin International, unpublished, , 2009. [9] A. Dimitrovski, A. Ford, K. Tomsovic, An interdisciplinary approach to long-term long modeling for power system expansion, International Journal of Critical Infrastructures Vol. 3, Nos s 1/2, 2007, pp. 235264.

At the core of this research, , two generally separate modeling approaches are merged to simulate the operation of a power system; the details of both consumer demand dynamics and power grid operation are captured. Demand emand dynamics are often neglected to be considered when using traditional approaches to planning, which often reduce demand growth to an exogenous variable. This is a justified ified assumption when dealing with more developed countries; however, in the context of a developing country, residents are poverty stricken and highly sensitive to the price of electricity, the reliability of the grid, the backlog of customers awaiting service, rvice, and the initial cost to connect to the grid, among other factors [6], [5]. The applied contributions tions of this work are two twofold. This work (1) extends the consideration of power system performance beyond a least-cost cost objective as numerous indicators that are of inter interest to energy stakeholders in developing economies are observed, and (2) provides a platform to answer various policy questions, such as exploring tradeoffs between investments in increased d access versus improved supply, or studying the impact of various policies on the evolution of the power system. While the simulation results shown here are preliminary and for illustration only, the results point to some important conclusions that will be the focus of further study tudy and policy analysis.