EE 369

POWER SYSTEM ANALYSIS

Lecture 16
Economic Dispatch

Tom Overbye and Ross Baldick
1
Announcements
Read (fourth edition) Chapter 11,
concentrating on sections 11.4 and 11.5;
(fifth edition) Chapter 12, concentrating on
sections 12.4 and 12.5.
Read Chapter 7.
Homework 12 is fourth edition: 11.19,
11.20, 11.21, 11.27, 11.28; fifth edition:
12.20, 12.21, 12.26, 12.27 due Tuesday
November 22 (note change of date!)
2
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
T
1
m
i=1
Minimize C ( )
Such that
m
i Gi
i
Gi D Losses
C P
P P P
=
= +

Initially we'll
ignore generator
limits and the
losses
3
Unconstrained Minimization
This is a minimization problem with a single
equality constraint
For an unconstrained minimization a
necessary (but not sufficient) condition for a
minimum is the gradient of the function
must be zero,
The gradient generalizes the first derivative
for multi-variable problems:

1 2
( ) ( ) ( )
( ) , , ,
n
x x x
( c c c
V
(
c c c

f x f x f x
f x
( ) V = f x 0
4
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 represent a constrained
minimization problem as an unconstrained
problem.
That is, for the general problem
minimize ( ) s.t. ( )
We define the Lagrangian L( , ) ( ) ( )
Then a necessary condition for a minimum is the
L ( , ) 0 and L ( , ) 0
T
=
= +
V = V =
x
f x g x 0
x f x g x
x x
5
Economic Dispatch Lagrangian
G
1 1
G
For the economic dispatch we have a minimization
constrained with a single equality constraint
L( , ) ( ) ( ) (no losses)
The necessary conditions for a minimum are
L( , )
m m
i Gi D Gi
i i
Gi
C P P P
dC
P

= =
= +
c
=
c

P
P
1
( )
0 (for 1 to )
0
i Gi
Gi
m
D Gi
i
P
i m
dP
P P

=
= =
=

6
Economic Dispatch Example
1 2
2
1 1 1 1
2
2 2 2 2
1 1
1
What is economic dispatch for a two generator
system 500 MW and
( ) 1000 20 0.01 $/h
( ) 400 15 0.03 $/h
Using the Lagrange multiplier method we know:
( )
20 0.0
D G G
G G G
G G G
G
G
P P P
C P P P
C P P P
dC P
dP

= + =
= + +
= + +
= +
1
2 2
2
2
1 2
2 0
( )
15 0.06 0
500 0
G
G
G
G
G G
P
dC P
P
dP
P P

=
= + =
=
7
Economic Dispatch Example, contd
1
2
1 2
1
2
1
2
We therefore need to solve three linear equations
20 0.02 0
15 0.06 0
500 0
0.02 0 1 20
0 0.06 1 15
1 1 0 500
312.5 MW
187.5 MW
26.2 $/MW
G
G
G G
G
G
G
G
P
P
P P
P
P
P
P

+ =
+ =
=

( ( (
( ( (
=
( ( (
( ( (

(
(
=
(
(

h
(
(
(
(

8
Lambda-Iteration Solution Method
The direct solution using Lagrange multipliers only
works if no generators are at their limits.
Another method is known as lambda-iteration
the method requires that there to be a unique
mapping from a value of lambda (marginal cost) to
each generators MW output:
for any choice of lambda (marginal cost), the
generators collectively produce a total MW output
the method then starts with values of lambda below
and above the optimal value (corresponding to too
little and too much total output), and then iteratively
brackets the optimal value.
( ).
Gi Gi
P P =
9
Lambda-Iteration Algorithm
L H
1 1
H L
M H L
H M
1
L M
Pick and such that
( ) 0 ( ) 0
While Do
( ) / 2
If ( ) 0 Then
Else
End While
m m
L H
Gi D Gi D
i i
m
M
Gi D
i
P P P P
P P


c



= =
=
< >
>
= +
> =
=

10
Lambda-Iteration: Graphical View
In the graph shown below for each value of lambda
there is a unique P
Gi
for each generator. This
relationship is the P
Gi
() function.
11
Lambda-Iteration Example
1 1 1
2 2 2
3 3 3
1 2 3
Consider a three generator system with
( ) 15 0.02 $/MWh
( ) 20 0.01 $/MWh
( ) 18 0.025 $/MWh
and with constraint 1000MW
Rewriting generation as a function of , (
G G
G G
G G
G G G
Gi
IC P P
IC P P
IC P P
P P P
P

= + =
= + =
= + =
+ + =
G1 G2
G3
),
we have
15 20
P ( ) P ( )
0.02 0.01
18
P ( )
0.025

= =

=
12
Lambda-Iteration Example, contd
m

Gi
i=1
m
Gi
i=1

1
H
1
Pick so P ( ) 1000 0 and
P ( ) 1000 0
Try 20 then (20) 1000
15 20 18
1000 670 MW
0.02 0.01 0.025
Try 30 then (30) 1000 1230 MW
L L
H
m
L
Gi
i
m
Gi
i
P
P

=
=
<
>
= =

+ + =
= =

13
Lambda-Iteration Example, contd
1
1
Pick convergence tolerance 0.05 $/MWh
Then iterate since 0.05
( ) / 2 25
Then since (25) 1000 280 we set 25
Since 25 20 0.05
(25 20) / 2 22.5
(22.5) 1000 195 we set 2
H L
M H L
m
H
Gi
i
M
m
L
Gi
i
P
P
c

=
=
=
>
= + =
= =
>
= + =
= =

2.5
14
Lambda-Iteration Example, contd
H
*
*
1
2
3
Continue iterating until 0.05
The solution value of , , is 23.53 $/MWh
Once is known we can calculate the
23.53 15
(23.5) 426 MW
0.02
23.53 20
(23.5) 353 MW
0.01
23.53 18
(23.5)
0.025
L
Gi
G
G
G
P
P
P
P

<

= =

= =

= 221 MW

=
15
Generator MW Limits
Generators have limits on the minimum and
maximum amount of power they can
produce
Typically the minimum limit is not zero.
Because of varying system economics usually
many generators in a system are operated at
their maximum MW limits:
Baseload generators are at their maximum limits
except during the off-peak.
16
Lambda-Iteration with Gen Limits
,max ,max
,min ,min
In the lambda-iteration method the limits are taken
into account when calculating ( ) :
if ( ) then set ( )
if ( ) then set ( )
Gi
Gi Gi Gi Gi
Gi Gi Gi Gi
P
P P P P
P P P P

> =
< =
17
Lambda-Iteration Gen Limit Example
G1 G2
G3
1 2 3
1
In the previous three generator example assume
the same cost characteristics but also with limits
0 P 300 MW 100 P 500 MW
200 P 600 MW
With limits we get
(20) 1000 (20) (20) (20) 100
m
Gi G G G
i
P P P P
=
s s s s
s s
= + +

1
0
250 100 200 1000
450 MW (compared to 670MW)
(30) 1000 300 500 480 1000 280 MW
m
Gi
i
P
=
= + +
=
= + + =

18
Lambda-Iteration Limit Example,contd
Again we continue iterating until the convergence
condition is satisfied. With limits the final solution
of , is 24.43 $/MWh (compared to 23.53 $/MWh
without limits). Maximum limits will always
cause

1
2
3
to either increase or remain the same.
Final solution is
(24.43) 300 MW
(24.43) 443 MW
(24.43) 257 MW

G
G
G
P
P
P

=
=
=
19
Thirty Bus ED Example
Case is economically dispatched without considering
the incremental impact of the system losses
20
Back of Envelope Values
Incremental costs can be roughly
approximated by a constant value:
$/MWhr = fuelcost * heatrate + variable O&M
Typical heatrate for a coal plant is 10, modern
combustion turbine is 10, combined cycle plant is
7 to 8, older combustion turbine 15.
Fuel costs ($/MBtu) are quite variable, with
current values around 2 for coal, 7 for natural gas,
0.5 for nuclear, probably 10 for fuel oil.
Hydro costs tend to be quite low, but are fuel
(water) constrained.

21
Aside: Levelized Cost of Generation,
operating costs plus paying off capital.
Source: California Energy Commission:
http://energyalmanac.ca.gov/electricity/levelized_costs.html
Technology $/MWh (2007 Dollars) (IOU)
Advanced Nuclear 104
Wind Class 5 67
Solar Photovoltaic 686
Solar Concentrating 434
Solar Parabolic Trough 281
Ocean Wave (Pilot) 838
Small Scale Hydro 118
Geothermal 63
Keep in mind these numbers involve LOTs of assumptions
that can drastically affect the value, and that many
technology costs are site dependent.
22
Inclusion of Transmission Losses
The losses on the transmission system are a
function of the generation dispatch.
In general, using generators closer to the
load results in lower losses
This impact on losses should be included
when doing the economic dispatch
Losses can be included by slightly rewriting
the Lagrangian:
G
1 1
L( , ) ( ) ( )
m m
i Gi D L G Gi
i i
C P P P P P
= =
| |
= + +
|
\ .

P
23
Impact of Transmission Losses
G
1 1
G
The inclusion of losses then impacts the necessary
conditions for an optimal economic dispatch:
L( , ) ( ) ( ) .
The necessary conditions for a minimum are now:
L( , )
m m
i Gi D L G Gi
i i
C P P P P P

= =
| |
= + +
|
\ .
c
c

P
P
1
( ) ( )
1 0
( ) 0
i Gi L G
Gi Gi Gi
m
D L G Gi
i
dC P P P
P dP P
P P P P

=
| | c
= =
|
c
\ .
+ =

24
Impact of Transmission Losses
th
( ) ( )
Solving for , we get: 1 0
( ) 1
( )
1
Define the penalty factor for the generator
(don't confuse with Lagrangian L!!!)
1
( )
1
i Gi L G
Gi Gi
i Gi
Gi L G
Gi
i
i
L G
Gi
dC P P P
dP P
dC P
dP P P
P
L i
L
P P
P

| | c
=
|
c
\ .
=
| | c

|
c
\ .
=
| c

c
\
|
|
.
The penalty factor
at the slack bus is
always unity!
25
Impact of Transmission Losses
1 1 1 2 2 2
The condition for optimal dispatch with losses is then
( ) ( ) ( )
1
. So, if increasing increases
( )
1
( )
the losses then 0 1.0
This makes generator
G G m m Gm
i Gi
L G
Gi
L G
i
Gi
L IC P L IC P L IC P
L P
P P
P
P P
L
P
= = =
=
| | c

|
c
\ .
c
> >
c
appear to be more expensive
(i.e., it is penalized). Likewise 1.0 makes a generator
appear less expensive.
i
i
L <
26
Calculation of Penalty Factors
Unfortunately, the analytic calculation of is
somewhat involved. The problem is a small change
in the generation at impacts the flows and hence
the losses throughout the entire system. However,
i
Gi
L
P

using a power flow you can approximate this function
by making a small change to and then seeing how
the losses change:
( ) ( ) 1
( )
1
Gi
L G L G
i
L G
Gi Gi
Gi
P
P P P P
L
P P
P P
P
c A
~ ~
A
c A

A
27
Two Bus Penalty Factor Example
2 2
2 2
( ) ( ) 0.37
0.0387 0.037
10
0.9627 0.9643
L G L G
G G
P P P P MW
P P MW
L L
c A
= = =
c A
= ~
28
Thirty Bus ED Example
Because of the penalty factors the generator incremental
costs are no longer identical.
29
Area Supply Curve
0 100 200 300 400
Total Area Generation (MW)
0.00
2.50
5.00
7.50
10.00
The area supply curve shows the cost to produce the
next MW of electricity, assuming area is economically
dispatched
Supply
curve for
thirty bus
system
30
Economic Dispatch - Summary
Economic dispatch determines the best way to
minimize the current generator operating costs.
The lambda-iteration method is a good approach for
solving the economic dispatch problem:
generator limits are easily handled,
penalty factors are used to consider the impact of losses.
Economic dispatch is not concerned with determining
which units to turn on/off (this is the unit commitment
problem).
Basic form of economic dispatch ignores the
transmission system limitations.
31