Energy Systems

For further volumes:http://www.springer.com/series/8368

Panos M. Pardalos, University of Florida, USA

Series Editor:

Energy Systems

•

• Panos M. Pardalos•

Editors

ABC

Steffen RebennackMario V.F. Pereira Niko A. Iliadis

Handbook of Power Systems I

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USA

Dr. Mario V. F. Pereira

Prof. Panos M. PardalosUniversity of Florida

Engineering

Gainesville FL [email protected]

Dr. Niko A. IliadisEnerCoRDPlastira Street 4Nea Smyrni 17121, [email protected]

ISBN: 978-3-642-02492-4 e-ISBN: 978-3-642-02493-1DOI 10.1007/978-3-642-02493-1

Library of Congress Control Number: 2010921798

© Springer-Verlag Berlin Heidelberg 2010

Department of Industrial and Systems

Springer Heidelberg Dordrecht London New York

Springer is part of Springer Science+Business Media (www.springer.com)

Editors

Cover illustration: Cover art is designed by Elias Tyligadas

Cover design: WMXDesign GmbH, Heidelberg

Centro EmpresarialRio Praia de Botafogo228/1701-A-BotafogoCEP: 22250-040Rio de Janeiro, [email protected]

Dr. Steffen RebennackColorado School of MinesDivision of Economics and BusinessEngineering Hall816 15th StreetGolden, Colorado 80401

[email protected]

303 Weil Hall, P.O. Box 116595

To our families.

•

Preface of Volume I

Power systems are undeniably considered as one of the most important infrastruc-tures of a country. Their importance arises from a multitude of reasons of technical,social and economical natures. Technical, as the commodity involved requires con-tinuous balancing and cannot be stored in an efficient way. Social, because powerhas become an essential commodity to the life of every person in the greatest partof our planet. Economical, as every industry relates not only its operations but alsoits financial viability in most cases with the availability and the prices of the power.

The reasons mentioned above have made power systems a subject of great inter-est for the scientific community. Moreover, given the nature and the specificities ofthe subject, sciences such as mathematics, engineering, economics, law and socialsciences have joined forces to propose solutions.

In addition to the specificities and inherent difficulties of the power systemsproblems, this industry has gone through significant changes. We could refer tothese changes from an engineering and economical perspective. In the last 40 years,important advances have been made in the efficiency and emissions of power gener-ation, and in the transmission systems of it along with a series of domains that assistin the operation of these systems. Nevertheless, the engineering perspective changeshad a small effect comparing to these that were made in the field of economicswhere an entire industry shifted from a long-standing monopoly to a competitivederegulated market.

The study of such complex systems can be realized through appropriate mod-elling and application of advance optimization algorithms that consider simulta-neously the technical, economical, financial, legal and social characteristics of thepower system considered. The term technical refers to the specificities of each assetthat shall be modelled in order for the latter to be adequately represented for thepurpose of the problem. Economical characteristics reflect the structure and oper-ation of the market along with the price of power and the sources, conventionalor renewable, used to be generated. Economical characteristics are strongly relatedwith the financial objectives of each entity operating a power system, and consistin the adequate description and fulfillment of the financial targets and risk profile.Legal specificities consist in the laws and regulations that are used for the opera-tion of the power system. Social characteristics are described through a series of

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parameters that have to be considered in the operation of the power system andreflect the issues related to the population within this system.

The authors of this handbook are from a mathematical and engineering back-ground with an in-depth understanding of economics and financial engineering toapply their knowledge in what is know as modelling and optimization. The focusof this handbook is to propose a selection of articles that outline the modelling andoptimization techniques in the field of power systems when applied to solve the largespectrum of problems that arise in the power system industry. The above mentionedspectrum of problems is divided in the following chapters according to its nature:Operation Planning, Expansion Planning, Transmission and Distribution Modelling,Forecasting, Energy Auctions and Markets, and Risk Management.

Operation planning is the process of operating the generation assets under thetechnical, economical, financial, social and legal criteria that are imposed within acertain area. Operation is divided according to the technical characteristics requiredand the operation of the markets in real time, short term and medium term. Withinthese categories the main differences in modelling vary in technical details, time stepand time horizon. Nevertheless, in all three categories the objective is the optimaloperation, by either minimizing costs or maximizing net profits, while consideringthe criteria referred above.

Expansion planning is the process of optimizing the evolution and developmentof a power system within a certain area. The objective is to minimize the costsor maximize the net profit for the sum of building and operation of assets withina system. According to the focus on the problem, an emphasis might be given inthe generation or the transmission assets while taking into consideration technical,economical, financial, social and legal criteria. The time-step used can vary between1 month and 1 quarter, and the time horizon can be up to 25 years.

Transmission modelling is the process of describing adequately the network of apower system to apply certain optimization algorithms. The objective is to define theoptimal operation under technical, economical, financial, social and legal criteria. Inthe last 10 years and because of the increasing importance of natural gas in powergeneration, electricity and gas networks are modelled jointly.

Forecasting in energy is applied for electricity and fuel price, renewable energysources availability and weather. Although complex models and algorithms havebeen developed, forecasting also uses historical measured data, which requireimportant infrastructure. Hence, the measurement of the value of information alsoenters into the equation where an optimal decision has to be made between the extentof the forecasting and its impact to the optimization result.

The creation of the markets and the competitive environment in power systemshave created the energy auctions. The commodity can be power, transmission capac-ity, balancing services, secondary reserve and other components of the system. Theparticipation of the auction might be cooperative or non-cooperative, where playersfocus on the maximization of their results. Therefore, the market participant focuson improving their bidding strategies, forecast the behavior of their competitors andmeasure their influence on the market.

Preface of Volume I ix

Risk management in the financial field has emerged in the power systems inthe last two decades and plays actually an important role. In this field the entitiesthat participate in the market while looking to maximize their net profits are heav-ily concerned with their exposure to financial risk. The latter is directly related tothe operation of the assets and also with a variety of external factors. Hence, riskmangers model their portfolios and look to combine optimally the operation of theirassets by using the financial instruments that are available in the market.

This handbook is divided into two volumes. The first volume covers the topicsoperation planning and expansion planning while the second volume focuses ontransmission and distribution modeling, forecasting in energy, energy auctions andmarkets, as well as risk management.

We take this opportunity to thank all contributors and the anonymous referees fortheir valuable comments and suggestions, and the publisher for helping to producethis volume.

February 2010 Steffen RebennackPanos M. PardalosMario V.F. Pereira

Niko A. Iliadis

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Contents of Volume I

Part I Operation Planning

Constructive Dual DP for Reservoir Optimization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3E. Grant Read and Magnus Hindsberger

Long- and Medium-term Operations Planning and StochasticModelling in Hydro-dominated Power Systems Basedon Stochastic Dual Dynamic Programming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33Anders Gjelsvik, Birger Mo, and Arne Haugstad

Dynamic Management of Hydropower-Irrigation Systems . . . . . . . . . . . . . . . . . . . 57A. Tilmant and Q. Goor

Latest Improvements of EDF Mid-term Power GenerationManagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77Guillaume Dereu and Vincent Grellier

Large Scale Integration of Wind Power Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Pedro S. Moura and Anıbal T. de Almeida

Optimization Models in the Natural Gas Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . .121Qipeng P. Zheng, Steffen Rebennack, Niko A. Iliadis,and Panos M. Pardalos

Integrated Electricity–Gas Operations Planning in Long-termHydroscheduling Based on Stochastic Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149B. Bezerra, L.A. Barroso, R. Kelman, B. Flach, M.L. Latorre,N. Campodonico, and M. Pereira

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Recent Progress in Two-stage Mixed-integer StochasticProgramming with Applications to Power Production Planning . . . . . . . . . . . . .177Werner Romisch and Stefan Vigerske

Dealing With Load and Generation Cost Uncertaintiesin Power System Operation Studies: A Fuzzy Approach . . . . . . . . . . . . . . . . . . . . . .209Bruno Andre Gomes and Joao Tome Saraiva

OBDD-Based Load Shedding Algorithm for Power Systems . . . . . . . . . . . . . . . . .235Qianchuan Zhao, Xiao Li, and Da-Zhong Zheng

Solution to Short-term Unit Commitment Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . .255Md. Sayeed Salam

A Systems Approach for the Optimal Retrofitting of UtilityNetworks Under Demand and Market Uncertainties . . . . . . . . . . . . . . . . . . . . . . . . . .293O. Adarijo-Akindele, A. Yang, F. Cecelja, and A.C. Kokossis

Co-Optimization of Energy and Ancillary Service Markets . . . . . . . . . . . . . . . . . .307E. Grant Read

Part II Expansion Planning

Investment Decisions Under Uncertainty Using StochasticDynamic Programming: A Case Study of Wind Power . . . . . . . . . . . . . . . . . . . . . . . .331Klaus Vogstad and Trine Krogh Kristoffersen

The Integration of Social Concerns into Electricity PowerPlanning: A Combined Delphi and AHP Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . .343P. Ferreira, M. Araujo, and M.E.J. O’Kelly

Transmission Network Expansion Planning Under DeliberateOutages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .365Natalia Alguacil, Jose M. Arroyo, and Miguel Carrion

Long-term and Expansion Planning for Electrical NetworksConsidering Uncertainties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .391T. Paulun and H.-J. Haubrich

Differential Evolution Solution to Transmission ExpansionPlanning Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .409Pavlos S. Georgilakis

Contents of Volume I xiii

Agent-based Global Energy Management Systemsfor the Process Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .429Y. Gao, Z. Shang, F. Cecelja, A. Yang, and A.C. Kokossis

Optimal Planning of Distributed Generation via NonlinearOptimization and Genetic Algorithms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .451Ioana Pisica, Petru Postolache, and Marcus M. Edvall

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .483

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Contents of Volume II

Part I Transmission and Distribution Modeling

Recent Developments in Optimal Power Flow ModelingTechniques . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Rabih A. Jabr

Algorithms for Finding Optimal Flows in Dynamic Networks. . . . . . . . . . . . . . . . 31Maria Fonoberova

Signal Processing for Improving Power Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55Long Zhou and Loi Lei Lai

Transmission Valuation Analysis based on Real Optionswith Price Spikes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101Michael Rosenberg, Joseph D. Bryngelson, Michael Baron,and Alex D. Papalexopoulos

Part II Forecasting in Energy

Short-term Forecasting in Power Systems: A Guided Tour . . . . . . . . . . . . . . . . . . .129Antonio Munoz, Eugenio F. Sanchez-Ubeda, Alberto Cruz, andJuan Marın

State-of-the-Art of Electricity Price Forecasting in a GridEnvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161Guang Li, Jacques Lawarree, and Chen-Ching Liu

Modelling the Structure of Long-Term Electricity ForwardPrices at Nord Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .189Martin Povh, Robert Golob, and Stein-Erik Fleten

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Hybrid Bottom-Up/Top-Down Modeling of Pricesin Deregulated Wholesale Power Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .213James Tipping and E. Grant Read

Part III Energy Auctions and Markets

Agent-based Modeling and Simulationof Competitive Wholesale Electricity Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241Eric Guerci, Mohammad Ali Rastegar, and Silvano Cincotti

Futures Market Trading for Electricity Producersand Retailers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .287A.J. Conejo, R. Garcıa-Bertrand, M. Carrion, and S. Pineda

A Decision Support System for Generation Planningand Operation in Electricity Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .315Andres Ramos, Santiago Cerisola, and Jesus M. Latorre

A Partitioning Method that Generates Interpretable Pricesfor Integer Programming Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .337Mette Bjørndal and Kurt Jornsten

An Optimization-Based Conjectured Response Approachto Medium-term Electricity Markets Simulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .351Julian Barquın, Javier Reneses, Efraim Centeno, Pablo Duenas,Felix Fernandez, and Miguel Vazquez

Part IV Risk Management

A Multi-stage Stochastic Programming Model for ManagingRisk-optimal Electricity Portfolios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .383Ronald Hochreiter and David Wozabal

Stochastic Optimization of Electricity Portfolios:Scenario Tree Modeling and Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .405Andreas Eichhorn, Holger Heitsch, and Werner Romisch

Taking Risk into Account in Electricity Portfolio Management . . . . . . . . . . . . . .433Laetitia Andrieu, Michel De Lara, and Babacar Seck

Aspects of Risk Assessment in Distribution System AssetManagement: Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .449Simon Blake and Philip Taylor

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .481

Contributors

O. Adarijo-Akindele Department of Chemical and Process Engineering,University of Surrey, Guildford GU2 7XH, UK

Natalia Alguacil ETSI Industriales, Universidad de Castilla – La Mancha,Campus Universitario, s/n, 13071 Ciudad Real, Spain, [email protected]

Madalena Araujo Department of Production and Systems, University of Minho,Azurem, 4800-058 Guimaraes, Portugal, [email protected]

Jose M. Arroyo ETSI Industriales, Universidad de Castilla – La Mancha, CampusUniversitario, s/n, 13071 Ciudad Real, Spain, [email protected]

Luiz Augusto Barroso PSR, Rio de Janeiro, Brazil

Bernardo Bezerra PSR, Rio de Janeiro, Brazil

Nora Campodonico PSR, Rio de Janeiro, Brazil

Miguel Carrion Department of Electrical Engineering, EUITI, Universidadde Castilla – La Mancha, Edificio Sabatini, Campus Antigua Fabrica de Armas,45071 Toledo, Spain, [email protected]

F. Cecelja Department of Chemical and Process Engineering, University of Surrey,Guildford GU2 7XH, UK, [email protected]

Anıbal T. de Almeida Department of Electrical and Computer Engineering,University of Coimbra, Portugal, [email protected]

Guillaume Dereu EDF R&D, OSIRIS, 1, avenue de Gaulle, 92140 Clamart,France, [email protected]

Marcus M. Edvall Tomlab Optimization Inc., San Diego, CA, USA

Paula Ferreira Department of Production and Systems, University of Minho,Azurem, 4800-058 Guimaraes, Portugal, [email protected]

Bruno da Costa Flach PSR, Rio de Janeiro, Brazil

Y. Gao Department of Chemical and Process Engineering, University of Surrey,Guildford GU2 7XH, UK

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xviii Contributors

Pavlos S. Georgilakis School of Electrical and Computer Engineering,National Technical University of Athens (NTUA), Athens, Greece,[email protected]

Anders Gjelsvik SINTEF Energy Research, 7465 Trondheim, Norway,[email protected]

Bruno Andre Gomes INESC Porto, Departamento de EngenhariaElectrotecnica e Computadores, Faculdade de Engenharia da Universidade doPorto, Campus da FEUP, Rua Dr. Roberto Frias 378, 4200-465 Porto, Portugal,[email protected]

Quentin Goor UCL, Place Croix-du-Sud, 2 bte 2, LLN, Belgium,[email protected]

Vincent Grellier EDF R&D, OSIRIS, 1, avenue de Gaulle, 92140 Clamart,France, [email protected]

H.-J. Haubrich Institute of Power Systems and Power Economics (IAEW),RWTH Aachen University, Schinkelstraße 6, 52056 Aachen, Germany,[email protected]

Arne Haugstad SINTEF Energy Research, 7465 Trondheim, Norway,[email protected]

Magnus Hindsberger Transpower New Zealand Ltd, P.O. Box 1021, Wellington,New Zealand, [email protected]

Niko A. Iliadis EnerCoRD Energy Consulting, Research, Development, 2nd floor,Plastira street 4, Nea Smyrni 171 21, Attiki, HELLAS, Athens, Greece,[email protected]

Rafael Kelman PSR, Rio de Janeiro, Brazil

A.C. Kokossis School of Chemical Engineering, National Technical Universityof Athens, Zografou Campus, 9, Iroon Polytechniou Str., 15780 Athens, Greece,[email protected]

Trine Krogh Kristoffersen Risøe National Laboratory of Sustainable Energy,Technical University of Denmark, Denmark, [email protected]

Maria Lujan Latorre PSR, Rio de Janeiro, Brazil

Xiao Li Center for Intelligent and Networked Systems (CFINS), Departmentof Automation and TNList Lab, Tsinghua University, Beijing 100084, China

Birger Mo SINTEF Energy Research, 7465 Trondheim, Norway,[email protected]

Pedro S. Moura Department of Electrical and Computer Engineering,University of Coimbra, Portugal, [email protected]

M.E.J. O’Kelly Department of Industrial Engineering, National UniversityIreland, Ireland

Contributors xix

Panos M. Pardalos Department of Industrial and Systems Engineering, Centerfor Applied Optimization, University of Florida, Gainesville, FL 32611, USA,[email protected]

T. Paulun Institute of Power Systems and Power Economics (IAEW), RWTHAachen University, Schinkelstraße 6, 52056 Aachen, Germany,[email protected]

Mario Veiga Ferraz Pereira Power Systems Research, Praia de Botafogo228/1701-A, Rio de Janeiro, RJ CEP: 22250-040, Brazil, [email protected]

Ioana Pisica Department of Electrical Power Engineering, University Politehnicaof Bucharest, Romania, [email protected]

Petru Postolache Department of Electrical Power Engineering, UniversityPolitehnica of Bucharest, Romania

E. Grant Read Energy Modelling Research Group, University of Canterbury,Private Bag 4800, Christchurch 8140, New Zealand, [email protected]

Steffen Rebennack Colorado School of Mines, Division of Economics andBusiness, Engineering Hall, 816 15th Street, Golden, Colorado 80401, USA,[email protected]

Werner Romisch Humboldt University, 10099 Berlin, Germany,[email protected]

Md. Sayeed Salam BRAC University, Dhaka, Bangladesh,[email protected]

Joao Tome Saraiva INESC Porto, Departamento de Engenharia Electrotecnicae Computadores, Faculdade de Engenharia da Universidade do Porto, Campusda FEUP, Rua Dr. Roberto Frias 378, 4200-465 Porto, Portugal, [email protected]

Z. Shang Department of Process and Systems Engineering, Cranfield University,Cranfield MK43 0AL, UK

Amaury Tilmant UNESCO-IHE, Westvest 7, Delft, the Netherlands,[email protected]

and

Swiss Federal Institute of Technology, Institute of Environmental Engineering,Wolfgang-Pauli-Strasse 15, 8093 Zurich, Switzerland, [email protected]

Stefan Vigerske Humboldt University, 10099 Berlin, Germany,[email protected]

Klaus [email protected]

A. Yang Department of Chemical and Process Engineering, University of Surrey,Guildford GU2 7XH, UK, [email protected]

Agder Energi Produksjon and NTNU Dept of Industrial Economics,

xx Contributors

Qianchuan Zhao Center for Intelligent and Networked Systems, Departmentof Automation and TNList Lab, Tsinghua University, Beijing 100084, China,[email protected]

Da-Zhong Zheng Center for Intelligent and Networked Systems, Departmentof Automation and TNList Lab, Tsinghua University, Beijing 100084, China,[email protected]

Qipeng P. Zheng Department of Industrial and Systems Engineering, Centerfor Applied Optimization, University of Florida, Gainesville, FL 32611, USA,[email protected]