Production Cost Model

Fundamentals

Midwest ISO

1
 Outline
 What is a Production Cost Model?
 Basics of Security Constrained Economic Dispatch
 What is PROMOD?
 PowerBase Database
 PROMOD Input Files and Assumptions
 PROMOD Output
 Economic Benefits Calculation
 PROMOD GUI Demo

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 What is a Production Cost Model?

3
 What is a Production Cost Model?
 Captures all the costs of operating a fleet of
generators
• Originally developed to manage fuel inventories
and budget in the mid 1970’s
 Developed into an hourly chronological
security constrained unit commitment and
economic dispatch simulation
• Minimize costs while simultaneously adhering to
a wide variety of operating constraints.
• Calculate hourly production costs and location-
specific market clearing prices.
4
 What Are the Advantages of
Production Cost Models?
 Allows simulation of all the hours in a year, not just
peak hour as in power flow models.
 Allows us to look at the net energy price effects
through
• LMP’s and its components.
• Production cost.

 Enables the simulation of the market on a forecast

basis
 Allows us to look at all control areas simultaneously
and evaluate the economic impacts of decisions.

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 Disadvantages of Production
Cost Models
 Require significant amounts of data
 Long processing times
 New concept for many Stakeholders
 Require significant benchmarking
 Time consuming model building process
• Linked to power flow models
 Do not model reliability to the same extent
as power flow
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 Production Cost Model vs.
Power Flow
 Production Cost Model  Power Flow

 SCUC&ED:  Hand dispatch (merit

very detailed Order)

 All hours  One hour at a time

 DC Transmission  AC and DC
 Selected security  Large numbers of
constraints security constraints
 Market analysis/  Basis for transmission
Transmission reliability &
analysis/planning operational planning
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 Basics of
Security Constrained
Economic Dispatch

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 What is covered in this section
 Understanding constrained dispatch
 Shift factor concept
 Shadow price of constraints
 LMP calculation and its components;

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 Economic Dispatch Formulation
N
Min  Ci  Pgi , Objective function – total cost
i 1

S .T .
N L

P  P
i 1
gi
j 1
lj  Loss  0, System Balance

 ki gi k , k  1, 2,..., K , Transmission Constraints

S
1
 P  T max

Pgimin  Pgi  Pgimax , i  1, 2,..., N , Capacity Constraints

Where Ski is a shift factor of branch k to the generator i,
Ci is an incremental price of energy at the
generator i.
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 Economic Dispatch Solution
 Non-linear optimization problem
 Quick Solution Using Linear Programming (LP)
 Desired generation dispatch for every dispatchable
generator.
 Shadow prices corresponding to each constraint.
 Binding constraints

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 Shift Factor

 Shift Factor (SF) shows how the flow in the

branch will change if the injection at the bus
changes by one (1) MW.
 All shift factors are computed relative to the
reference bus, shift factor is dependent on the
location of the reference bus.
 The shift factor at the reference bus equals to
zero.
 Shift factors are solely dependent on the
network topology and impedance.

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 Five Bus System Example -
Generation Cost
Incremental Cost Unit 1 Incremental Cost Unit 5

30 $/mw
Inc Cost

Inc Cost
15 $/mw

400 600

MW Output MW Output

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 Economic Dispatch (No Transmission)
Load: 600 MW

G1 = 400 MW
G5 = 200 MW (Marginal)

Cost = 400 x $15 + 200 x

$30 = $12,000

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 5 Bus Power Network
1 a 2

Shift Factors
400mw unit Bus 1 0.1818 200 MW
@$15 Bus 2 0.3636 Customer
b Bus 3 0
Bus 4 -0.1818
Bus 5 0.0909
d f

c e 5

3 4 600 mw unit
@$30

100 MW 300 MW

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 5 Bus Power Network
400mw unit 1 2
@$15

Shift Factors
Supplier Bus 1 0.1818 200 MW
Bus 2 0.3636
Bus 3 0
Flow on d from load:
Bus 4 -0.1818
-200 * 0.3636 +
Bus 5 0.0909
-100 * 0 +
-300 * -0.1818 = -18.18 mw

Flow on d from gen:

5 Supplier
400 * 0.1818 +
200 * 0.0909 = 90.90 mw

Total Flow on d:
-18.18 + 90.90 = 72.72 mw 3 4 600 mw unit
@$30
100 MW 300 MW

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 Flow “d” Components

Load Component Shift Factors

Flow on Line d = -18.18 + .1818 G1 + .0909 G5

= -18.18 + .1818 400 + .0909 200

= -18.18 + 72.73 + 18.18

= 72.73 Megawatts total flow

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 Transmission Constraint Applied
If dmax = 50 MW , the dispatch is not acceptable!

Flow: d = -18.18 +.1818 G1 + .0909 G5 = 50

Load Balance: G1 + G5 = 600

G1 = 150
Both Marginal !
G5 = 450
Cost = $15,750

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 Constraint Shadow Price
 What if the constraint were 51 mw?
 The incremental increase in cost is the shadow price

Flow: d = -18.18 +.1818 G1 + .0909 G5 = 51

Load Balance: G1 + G5 = 600
Cost = $15,585 G1=161MW, G5=439MW
Shadow price = 15,585 – 15,750 = -165 $/mw

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 Bus Locational Marginal Prices
 How much will the next mw of load cost?

• Is it simply the marginal unit cost?

 LMP definition:

• A change in the total cost of production due to increment of load at

this location.

 Bus LMPs can be calculated by adding one MW of load at each

bus and determining the corresponding change in the total
production cost

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 5 Bus System Incremental Network
1 2
g1
0 MW

5
g5

3 4

0 MW 1 MW

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 The Incremental Flow Equation

 The change in generation must result in zero flow change

 Power changes at the marginal units, and at the load bus
 The sum of power change must be zero

Bus 4: Add 1 MW Load

New flow equation...
.1818 g1 + .0909 g5 - .1818 (-1) = 0

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 Incremental Equations
Load Balance: g1 + g5 = 1
Flow “d” : .1818 g1 + .0909 g5 = - .1818

Solution: g1 = - 3
g5 = +4 (wow !)

lmp = -3 x $15 + 4 x $30 = 75 $/mw

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 Price at Bus 2
Bus 2: Add 1 MW Demand.
New equations...

.1818 g1 + .0909 g5 + .3636 (-1) = 0

g1 + g5 = 1

Solution: g1 = 3
g5 = -2
lmp = 3 x 15 - 2 x 30 = - 15 $/mw
(!)

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 What about Bus 3 (slack bus)?
Bus 3: Add 1 MW Demand.
New equations...

.1818 g1 + .0909 g5 + .0000 (-1) = 0

g1 + g5 = 1

Solution: g1 = -1
g5 = +2
lmp = (-1*15) + (2*30) = 45 $/mw

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 Buses 1 and 5?

 These are the “price setting buses”

 LMP at these buses will be the gen price
 LMP1 = $15
 LMP5 = $30

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 LMP Calculation
 LMP at any location is calculated based on
the shadow prices out of LP solution.
 The following fundamental formula is used to
calculate LMPs. For any node i:
K
i    LFi     Sik  k ,
k 1

Congestion Component

Loss Component
Energy Component

where  is a shadow price of the system balance constraint.

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 5 Bus System – LMP Calculation using
Shadow Price

Bus Shift Factor -165 45

1 0.1818 -30.000 15.000
2 0.3636 -60.000 -15.000
3 0.0000 0.000 45.000
4 -0.1818 30.000 75.000
5 0.0909 -15.000 30.000

K
i    LFi     Sik  k ,
k 1

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 What is PROMOD

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 Background
 PROMOD is a Production Cost Model
developed by Ventyx (Formerly known as
NewEnergy Associates, A Siemens
Company).
 Detailed generator portfolio modeling, with
both region zonal price and nodal LMP
forecasting and transmission analysis
including marginal losses

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 How PROMOD Works - PROMOD Structure
PSS/E™

Report Agent
Visualization & Reporting
COH - Firm Requirements and Supply

140,000

Common API 120,000

100,000
Enduser Balancing
Exchange Payback

- Detailed unit commitment and

80,000 Injections

MDTH
Firm Demand
Enduser Supply/Balancing
60,000 Exchange Supply
Withdrawals
Purchases
40,000

dispatch 20,000

Nov-03
Jul-03
Feb-03

Mar-03

Apr-03

May-03

Aug-03

Sep-03

Oct-03

Summer 2003

Annual 02-03
Winter 02-03
- Detailed transmission simulation
Common - Asset Valuation with MarketWise
Data Source - FTR Valuation with TAM

- Easy-to-use interface
- Powerful scenario management
- Complete NERC data with solved Access, Excel, Pivot Cube…
powerflow cases
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 How PROMOD Works –
Input and Output of PROMOD
 Hourly LMP of buses
and hubs, include
 Generation Data: heat energy, loss and
rate, different costs, congestion
etc. components.
 Demand & Energy  Hourly unit generation
and production cost
 Fuel Forecasts: Gas,
Coal, Oil  Hourly binding
PROMOD constraints and
 Environmental Costs: shadow prices
Sox, Nox, Mercury
 Hourly line flows
 Power Flow Case
 Hourly company
 Monitored Flowgates purchase/sale
 Other Information:  Environmental
reserve requirement, emissions.
market territory, etc.
 Fuel consumptions.
 etc.

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 Magnitude of the Challenge

Real System Dimensions –

MTEP 08 PROMOD Cases
 Footprint: East interconnection excluding FRCC
 Generators: ~ 4,700
 Buses: ~ 47,500
 Branches: ~ 60,000
 Monitored Lines: ~ 1,500
 Contingencies: ~ 500
 Run Time: 60-90 Hrs (for one year 8760 hours)
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 Powerbase Database

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 Data in PowerBase
 Generation
 Demand & Energy
 Transmission Network Data
 Fuel Forecasts
• Coal, Uranium, Gas, Coal, Oil
 Environmental Effluent and Costs
• CO2, Sox, Nox, Mercury

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 PROMOD Input Files
and
Assumptions

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 PROMOD input files
 PFF file
• Main input file, includes units, fuels, environmental and
transmission data, pool configuration, reserve requirement,
run option switches, etc.
 Load data file
• Hourly load profiles for each company for a selected study
period.
• Based on the 8760 hour load shape and each year’s peak
load and annual energy for each company defined in
PowerBase.
 Gen Outage Library and automatic maintenance
schedule
• Same outage library and maintenance schedule used by all
cases

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 PROMOD input files
 Event files
• Define the monitored line/contingency pairs
which are the transmission constraints
• Combine MISO and NERC Book of Flowgates
• Modify existing events or add new events
according to member’s comments.
• Create new events which have the potential of
overflow using PAT tool

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 PROMOD Assumptions
 Study Footprint
• East interconnection excluding Florida
• Hourly fixed transactions modeled to include the
influence of external areas to the study footprint
SETRANS sale to Florida

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 PROMOD Assumptions (Cont’)
Pool Definition
 a group of companies in which all its generators
are dispatched together to meet its loads.
 Hurdle rates are defined between pools to allow
the energy exchange between pools.
 Hurdle rates are based on the filed transmission
through-and-out rates, plus a market inefficiency
adder.
 In current MISO cases, 11 pools are defined:
MISO, PJM, TVA, MRO, East Canada, SPP, IMO,
MHEB, ISONE,NYISO,SERC

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 PROMOD Assumptions (Cont’)
 Loss Calculation
• Option1: Load is equal to actual load plus loss. Loss and
LMP loss component are not calculated.

• Option 2: Load is equal to actual load plus loss. Loss is

not calculated while LMP loss component is calculated
using an approximation method – Single Pass Loss
Calculation.

• Option 3: Load is equal to actual load. Loss and LMP

loss component are calculated – Multi Pass Loss
Calculation. Run time is 4 times of Option 2.

Option 2 is used in MISO PROMOD cases.

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 PROMOD Assumptions (Cont’)
 Wind Units – fixed load modifier transactions
 Set at a same capacity factor for every hour (~
33%);
 Set different capacity factors for different months
(15% for summer months, and 20% for winter
months);
 Set hourly profile for each unit to capture
geographical diversity.
 Smelter Loads modeled as transactions

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 PROMOD Output

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 PROMOD Output
 LMPs (include the energy, loss and
congestion components):
 Hourly LMP of selected buses, defined hubs.
 Hourly Load Weighted and Gen Weighted LMP
of defined zones.
 Constraints:
 Hourly shadow price;
 Number of hours at Pmax, total shadow price at
Pmax;
Number of hours at Pmin, total shadow price at
Pmin;
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 PROMOD Output (Cont’)
 Generators:
 Hourly generation
 Hourly production cost (sum of fuel, variable
O&M, environmental cost)
 Hourly fuel consumption, BTU consumption
 Hours on line, hours of startup, hours at margin,
Hours profitable.
 Monthly variable O&M cost, fuel cost, emission,
and emission cost.

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 PROMOD Output (Cont’)
 Fuel:
 Hourly fuel consumption.
 Power Flow:
 Hourly flow for selected lines, interfaces, and DC
lines.
 Monthly transmission losses (only for marginal
loss calculation option)
 Company:
 Hourly purchase/sale.
 Hourly dump and emergency energy.
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 Economic Benefits Calculation

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 Economic Benefit
 To capture the economic benefit of transmission
upgrade: run two PROMOD cases, one with
transmission upgrade, one without. For each case,
calculate (for each region):
• Load Cost = Load LMP * Load
• Adjusted Production Cost = Production Cost + Import * Load
Weighted LMP (or) - Export *Gen Weighted LMP

 Economic Benefit:
• Load Cost Saving: Load Cost difference between two cases;
• Adjusted Production Cost Saving: Adjusted Production Cost
difference between two cases
• RECB II Benefit = sum over all regions (30%* Load Cost
Saving + 70%*Adjusted Production Cost Saving)
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 Example:
5 Bus Power Network
1 2

400 MW unit 200 MW

@$15 Load
d

Region 1

5
Region 2

3 4 600 MW unit
@$30
100 MW 300 MW
49 Load Load
 5 Bus Power Network (Original)
– PROMOD result
Gen: 150 MW Load: 200 MW
LMP: -15$/MWH
LMP: 15$/MWH 1 2 Load Cost: -3,000$
Prod. Cost: 2,250$

Region 2:
Line is binding Export: 150 MWH
Region 1: Gen Weighted LMP
Import: 150 MWH =30$/MWH
Load Weighted LMP = 50 MW
Load Cost = 22,500$
(-3,000+4,500)/(100+200) Adjusted Production
=5$/MWH Cost = 13,500$
Load Cost = -3,000 + 4,500 - 150MWH*30$/MWH
= 1,500$ =9,000$
Adjusted Production Cost =
2,250$+150MWH*5$/MWH
=3,000$
5

3 4 Gen: 450 MW
Load: 100 MW Load: 300 MW LMP: 30$/MWH
LMP: 45$/MWH LMP: 75$/MWH Prod. Cost: 13,500$
50 Load Cost: 4,500$ Load Cost: 22,500$
 5 Bus Power Network (After upgrade)
– PROMOD result
Gen: 400 MW Load: 200 MW
LMP: 30$/MWH
LMP: 30$/MWH 1 2 Load Cost: 6,000$
Prod. Cost: 6,000$

Region 2:
New Line Import: 100 MWH
Region 1: Load Weighted LMP
Export: 100 MWH =30$/MWH
Gen Weighted LMP = 47 MW Load Cost = 9,000$
=30$/MWH Adjusted Production
Load Cost = 6,000 + 3,000 Cost = 6,000$+
= 9,000$ 100MWH*30$/MWH
Adjusted Production Cost = =9,000$
6,000$-100MWH*30$/MWH
=3,000$ 5

3 4 Gen: 200 MW
Load: 100 MW Load: 300 MW LMP: 30$/MWH
LMP: 30$/MWH LMP: 30$/MWH Prod. Cost: 6,000$
51 Load Cost: 3,000$ Load Cost: 9,000$
 5 Bus Power Network
– New Transmission RECB II Benefit
Original Case Case with New Line Saving

Load Cost $1,500 $9,000 $-7,500

Region 1

Adjusted $0
$3,000 $3,000
Production
Cost

Load Cost $22,500 $9,000 $13,500

Region 2

Adjusted $0
Production $9,000 $9,000
Cost

RECB II Benefit = 70% * 0 +30% * (-7,500+13,500) = $1,800

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