Least Cost System Operation:

Economic Dispatch 2
Smith College, EGR 325
March 10, 2006

Overview
Complex system time scale separation
Least cost system operation
Economic dispatch first view
Generator cost characteristics

System-level cost characterization

Constrained optimization
Linear programming
Economic dispatch completed
2

Time Scale Separation

1. Decide what to build
2. Given the plants that are built decide which
plants to have warmed up and ready to go this
month, week...
3. Given the plants that are ready to generate
decide which plants to use to meet the
expected load today, the next 5 minutes,
next hour...
4. Given the plants that are generating Decide
how to maintain the supply and demand
balance cycle to cycle

Economic Dispatch Recap

Economic dispatch determines the best
way to minimize the current generator
operating costs
Economic dispatch is not concerned with
determining which units to turn on/off (this
is the unit commitment problem)
Economic dispatch ignores the
transmission system limitations
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Constrained Optimization
& Economic Dispatch

Mathematical Formulation of Costs

Generator cost curves are not actually smooth
Typically curves can be approximated using
quadratic or cubic functions
piecewise linear functions

Ci ( PGi ) i PGi PGi2

$/hr (fuel-cost)

dCi ( PGi )
ICi ( PGi )
2 PGi $/MWh
dPGi
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Mathematical Formulation of Costs

The marginal cost is one of the most important
quantities in operating a power system
Marginal cost = incremental cost: the cost of
producing the next increment (the next MWh)
How do we find the marginal cost?

Economic Dispatch
An economic dispatch results in all the
generator generating at a level where they
have equal marginal costs (for a lossless
system)

IC1(PG,1) = IC2(PG,2) = = ICm(PG,m)

Incremental Cost Example

For a two generator system assume
C1 ( PG1 ) 1000 20 PG1 0.01PG21

$ / hr

C2 ( PG 2 ) 400 15 PG 2 0.03PG22

$ / hr

Then
dC1 ( PG1 )
IC1 ( PG1 )
20 0.02 PG1 $/MWh
dPG1
dC2 ( PG 2 )
IC2 ( PG 2 )
15 0.06 PG 2 $/MWh
dPG 2
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Incremental Cost Example

If PG1 250 MW and PG2 150 MW Then
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C1 (250) 1000 20 250 0.01 250 $ 6625/hr

C2 (150) 400 15 150 0.03 1502

$6025/hr

Then
IC1 (250) 20 0.02 250 $ 25/MWh
IC2 (150) 15 0.06 150 $ 24/MWh

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Economic Dispatch: Formulation

The goal of economic dispatch is to
determine the generation dispatch that
minimizes the instantaneous operating cost
subject to the constraint that total generation =
total load + losses

Minimize

CT @ Ci ( PGi )
i 1

Such that
m

PGi PD PLosses
i=1

Initially we'll
ignore generator
limits and the
losses
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Unconstrained Minimization
This is a minimization problem with a single
inequality constraint
For an unconstrained minimization a
necessary (but not sufficient) condition for a
minimum is the gradient of the function must
be zero,
f ( x ) 0
The gradient generalizes the first derivative
for multi-variable problems:
f (x) f (x)
f (x)
f (x) @
,
,K ,

1
2
n

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Minimization with Equality Constraint

When the minimization is constrained with an
equality constraint we can solve the problem using
the method of Lagrange Multipliers
Key idea is to modify a constrained minimization
problem to be an unconstrained problem
That is, for the general problem
minimize f (x) s.t. g(x) 0
We define the Lagrangian L(x, ) f (x ) Tg (x )
Then a necessary condition for a minimum is the
L x(x, ) 0 and L (x , ) 0
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Economic Dispatch Lagrangian

For the economic dispatch we have a minimization
constrained with a single equality constraint
L(PG , )

i 1

i 1

Ci ( PGi ) ( PD PGi )

(no losses)

The necessary conditions for a minimum are

L(PG , )
dCi ( PGi )

0 (for i 1 to m)
PGi
dPGi
m

PD PGi 0
i 1

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Economic Dispatch Example

What is economic dispatch for a two generator
system PD PG1 PG 2 500 MW and
C1 ( PG1 ) 1000 20 PG1 0.01PG21

$ / hr

C2 ( PG 2 ) 400 15 PG 2 0.03PG22

$ / hr

Using the Largrange multiplier method we know

dC1 ( PG1 )
20 0.02 PG1
0
dPG1
dC2 ( PG 2 )

dPG 2

15 0.06 PG 2

500 PG1 PG 2 0

0
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Economic Dispatch Example, contd

We therefore need to solve three linear equations
20 0.02 PG1
0
15 0.06 PG 2

500 PG1 PG 2 0
0
1 P G1
0.02
20
0
0.06 1 P G 2 15

1 0
500
1

PG1
312.5 MW
P 187.5 MW
G 2

26.2 $/MWh

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Constrained Optimization &

Linear Programming

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Linear Programming Definition

Optimization is used to find the best
value
Best defined by us, the analysts and
designers

Constrained opt Linear programming

Linear constraints
Complicates the problem
Some binding, some non-binding

Visualize via a feasible region

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Formulating the Problem

Objective function
Constraints
Decision variables
Variable bounds
Standard form
min cx
s.t. Ax = b
xmin <= x <= xmax
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Formulating the Problem

For power systems:
min CT = Ci(PGi)
s.t. (PGi) = PL
PGi min <= PGi <= PGi max

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Constrained Optimization
& Economic Dispatch
The Lagrangean

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Formulating the Lagrangean

Rewrite the constrained optimization
problem as an unconstrained optimization
problem !
Then we can use the simple derivative
(unconstrained optimization) to solve

The task is to interpret the results correctly

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Formulating the Lagrangean

We are minimizing gradients of both
multivariate equations
CT &

PGi = PL

For both equations to be at a minimum

these gradients must be linearly dependent
vectors
CT w = 0
with w PG PL = 0

The Lagrangean multiplier

is defined to be the scaling variable that
brings CT and w into linear alignment

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Lagrangean Example
max g(x) = 5x12x2
s.t.

h(x) = x1 + x2 = 6 or x1 + x2 6 = 0

Formulate L =
L = g(x) h(x)
Find ?
dL/dx1, dL/dx2, dL/d
x1 = 4, x2 = 2, = 80
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Economic Dispatch & the Lagrangean

min CT = Ci(PGi)
s.t. (PGi) = PL
PGi min <= PGi <= PGi max
Then L = ?

L CT PGi PL
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Economic Dispatch Example

What is the economic dispatch for the two
generator problem with
PG1 + PG2 = PD = 500MW

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Economic Dispatch Example

Formulate the Lagrangean
Take derivatives
Solve

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Economic Dispatch Example, contd

We therefore need to solve three linear equations
20 0.02 PG1
0
15 0.06 PG 2

500 PG1 PG 2 0
0
1 P G1
0.02
20
0
0.06 1 P G 2 15

1 0
500
1

PG1
312.5 MW
P 187.5 MW
G 2

26.2 $/MWh

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Economic Dispatch: Formulation

We find that
PG1 = 312.5MW;
PG2 = 187.5MW

= $26.2/MWh

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Discussion
Key results for Economic Dispatch?
Incremental cost of all generating units is
equal
This incremental cost is the Lagrangean
multiplier,
is called the System and is the systemwide cost of generating electricity
This is the price charged to customers

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Power System Control Center

31

Power System Control Center

32

New England Power Grid Operator

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Regional Prices and Constraints

34

The Hong Kong Trade Development Council

35

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Summary
Economic dispatch is used to determine
the least cost means of using existing
generating plants to meet electric demand
To calculate the economic dispatch for a
power system, the techniques of linear
programming + the Lagrangean are used
Now to a review of the production cost
homework results...
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