Fundamentals and Advances in Enterprise-wide Optimization for Industrial Demand Side Management EWO Seminar at CMU, Pittsburgh May 11, 2016 Qi Zhang Center for Advanced Process Decision-making Department of Chemical Engineering, Carnegie Mellon University
32
Embed
Fundamentals and Advances in Enterprise- wide Optimization ...egon.cheme.cmu.edu/ewo/docs/EWO_Seminar_05_11_2016.pdf · Fundamentals and Advances in Enterprise- wide Optimization
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Fundamentals and Advances in Enterprise-wide Optimization for Industrial Demand Side Management
EWO Seminar at CMU, Pittsburgh May 11, 2016
Qi Zhang
Center for Advanced Process Decision-making Department of Chemical Engineering, Carnegie Mellon University
The main driver for DSM is time-sensitive pricing
Electricity prices change on an hourly basis (more frequently in the real-time market)
Challenge, but also opportunity for electricity consumers
Hourly electricity prices in 2013
Time [h]
Pric
e [$
/MW
h]
Source: PJM Interconnection LLC
Chemical plants are large electricity consumers → high potential cost savings
2 / 32
Outline
Part I: Fundamentals of deregulated electricity markets
• Power system economics
• Demand side management
Part II: Enterprise-wide optimization for industrial DSM
• Modeling operational flexibility
• Integration of production and energy management
• Multiscale decision-making
• Optimization under uncertainty
Conclusions
3 / 32
Deregulated electricity markets involve many participants
An independent system operator (ISO) controls the transmission network and operates the wholesale market. Its primary responsibility is to ensure the reliability of the power grid.
Generation Transmission Distribution Consumption
Generating Companies
Transmission Companies
Retailers Small Consumers
Large Consumers
Distribution Companies
Wholesale Market
Retail Market
4 / 32
In most parts of the U.S., electricity markets are deregulated
The U.S. is divided into 3 interconnected power grids
Deregulated electricity markets are operated by 7 ISOs and regional transmission organizations (RTOs), which are non-profit organizations
Source: AIChE CEP
Western Interconnect
Texas Interconnect
Eastern Interconnect
5 / 32
Electricity is traded as a commodity and as a service
Balance between supply and demand must be maintained at all times
Electrical energy is very difficult to store
No lead time, electrical energy has to be produced at the same time it is consumed
Electrical energy market
• Electricity is treated as a commodity
Ancillary services market
• Backup capacities provided by flexible resources that can help eliminate supply-demand imbalance
• Categorized according to the response time, e.g. regulation (seconds) and operating reserves (minutes)
Ancillary services ensure grid reliability, but at the cost of reduced efficiency.
Power Generation
40 MW traded as ancillary services
50 MW traded in the energy market
Actual amount of power generated: 50-90 MW
50 MW
90 MW
6 / 32
Electricity is traded through bilateral contracts and auctions
Bilateral contracting
• Buyer and seller enter into contracts without the ISO’s involvement
Auctions in electricity pools
• Electrical energy is indistinguishable
• Pooling results in economies of scale
• Generating companies submit bids ranked in order of increasing price
• Consumers submit offers ranked in order of decreasing price
• Market is cleared at the price where the constructed supply and demand curves intersect
After the market is cleared, the same price applies to all participants.
Quantity (MWh)
Price ($/MWh)
Supply
Demand
𝑃∗
𝑄∗
7 / 32
Transmission constraints lead to locational marginal pricing
May 4, 2016, 14:00 May 4, 2016, 14:15
Source: MISO
8 / 32
Modern power system operation is increasingly leveraging consumers’ load adjustment capabilities
The power grid is experiencing increased load variability and uncertainty due to growing demand and share of intermittent renewable power generation
Increased focus on DSM creates opportunities for power-intensive industries.
Net Load Curves Source: CAISO Demand side management (DSM) can help flatten the
net load curve
DSM is encouraged by financial incentives
Win-win for grid operator and consumer
9 / 32
Classification of DSM activities
Demand Side Management
Energy Efficiency (EE) Demand Response (DR)
Dispatchable DR Nondispatchable DR
Process Design/Retrofit
Load Profile Adjustment in Response to Price Changes
Load Profile Adjustment in Response to DR Events
Direct Load Control
Interruptible Load
Ancillary Services
…
Time-of-Use Pricing
Critical Peak Pricing
Real-Time Pricing
…
10 / 32
Outline
Part I: Fundamentals of deregulated electricity markets
• Power system economics
• Demand side management
Part II: Enterprise-wide optimization for industrial DSM
• Modeling operational flexibility
• Integration of production and energy management
• Multiscale decision-making
• Optimization under uncertainty
Conclusions
11 / 32
We identify four major challenges in industrial DSM
iDSM
Modeling Process Dynamics and
Operational Flexibility
Integration of Production and
Energy Management
Decision-making Across Multiple
Time and Space Scales
Forecasting and Optimization Under
Uncertainty
12 / 32
Incorporating time-varying prices into discrete-time models is straightforward, not so in continuous-time formulations
Discrete-time models may require a large number of time periods
Continuous-time models may be smaller but tend to be more complex
For example, MILP constraints can be formulated to consider the following task-interval overlap cases1,2:
When making long-term decisions, also the short-term effects due to time-sensitive pricing have to be considered
An hourly time discretization over the entire length of the planning horizon (e.g. a year) is computationally intractable
To capture the seasonal behavior of electricity prices, the planning horizon is often divided into seasons with each season represented by one or more characteristic weeks1
Week Sp1
Week Sp2
Week Su1
Week Su2
Week Fa1
Week Fa2
Week Wi1
Week Wi2
Spring Summer Fall Winter
1. Mitra et al. (2014). Computers & Chemical Engineering, 65, 89-101.
20 / 32
Outline
Part I: Fundamentals of deregulated electricity markets
• Power system economics
• Demand side management
Part II: Enterprise-wide optimization for industrial DSM
• Modeling operational flexibility
• Integration of production and energy management
• Multiscale decision-making
• Optimization under uncertainty
Conclusions
21 / 32
Electricity price uncertainty is often modeled using two-stage stochastic programming1
Uncertainty characterized by a set of scenarios with given probabilities
Often scenario reduction and decomposition methods are required to achieve computational tractability2
1. Birge, Louveaux (2011).
Scheduling horizon
Here-and-now decisions
Wait-and-see decisions
Time
Elec
tric
ity P
rice
2. Z. et al. (2016). Computers & Chemical Engineering, 86, 90-105.
22 / 32
DSM allows participation in the ancillary services market
Supply Demand
Supply Demand
Supply Demand
Shortage of supply compensated by generators with short ramp-up times
Referred to as operating reserve Expensive, requires underutilization of
generation facilities
Supply-demand mismatch eliminated by reducing electricity consumption
Also referred to as interruptible load Less expensive, reduces the need of
building new power plants
<
23 / 32
Dispatchable DR is subject to high uncertainty
Target power consumption
Minimum power consumption
Time
Power Consumption
Interruptible Load
Load reduction requested
Load reduction requested
Actual power consumption
Load reduction demand is uncertain
24 / 32
Apply adjustable robust optimization approach to incorporate recourse decisions1
Decisions have to depend on the realization of the uncertainty
Traditional static robust optimization: No recourse, only here-and-now decisions
Adjustable robust optimization2: Recourse decision variables are specified as functions of the uncertain parameters
For tractability reasons, restrict to affine functions:
1. Z. et al. (2016). Computers & Chemical Engineering, 86, 106-119. 2. Ben-Tal et al. (2004). Mathematical Programming, 99(2), 351-376.
actual production
target production
uncertain load reduction
decision coefficient
multistage linear decision rule
𝑝𝑡 and 𝑞𝑡𝑡 are decision variables 𝜁 defines the extent of recourse
25 / 32
Robust solutions are found with respect to a given uncertainty set while minimizing the worst-case cost
Time [h] Target LO2 Production Target LO2 Purchase LO2 Demand Production Recourse Purchase Recourse Target LO2 Inventory
No inventory buffer required
29 / 32
Outline
Part I: Fundamentals of deregulated electricity markets
• Power system economics
• Demand side management
Part II: Enterprise-wide optimization for industrial DSM
• Modeling operational flexibility
• Integration of production and energy management
• Multiscale decision-making
• Optimization under uncertainty
Conclusions
30 / 32
Conclusions
Win-win: DSM increases power grid performance as well as consumer benefits
Need basic understanding of electricity market mechanisms
EWO can help maximize benefits from DSM for power-intensive industries
Future opportunities:
• Consider collaboration between companies operating interrelated power-intensive processes, e.g. steel plant and air separation plant
• Consider DSM at the supply chain level
• Optimize bidding strategy for large consumers
• Explore more dispatchable DR opportunities
• Co-optimize production scheduling, energy management, and energy trading
• Develop more efficient algorithms to solve larger problems (multiscale, stochastic)
31 / 32
References
Kirschen, D. & Strbac, G. (2004). Fundamentals of Power System Economics. John Wiley & Sons, Ltd.
Zhang, Q. & Grossmann, I. E. (2016). Planning and Scheduling for Industrial Demand Side Management: Advances and Challenges. In: Martin, M. (Ed.), Alternative Energy Sources and Technologies: Process Design and Operation (pp. 383-414), Springer.
Zhang, Q. & Grossmann, I. E. (2016). Enterprise-wide Optimization for Industrial Demand Side Management: Fundamentals, Advances, and Perspectives. In preparation.