Economic Dispatch(2)

(Generator Cost Curve)

Generator Cost Curves

⚫ Generator costs are typically represented by up to

four different curves
– input/output (I/O) curve
– fuel-cost curve
– heat-rate curve
– incremental cost curve
⚫ For reference ( Conversion Unit Power)
- 1 Btu (British thermal unit) = 1054 J
- 1 MBtu = 1x106 Btu
- 1 MBtu = 0.293 MWh
- 3.41 Mbtu = 1 MWh
1
I/O Curve

⚫ The IO curve plots fuel input (in MBtu/hr) versus

net MW output.

2
Fuel-cost Curve

⚫ The fuel-cost curve is the I/O curve scaled by fuel

cost. Coal prices vary; around $1/Mbtu to $2/Mbtu

3
Heat-rate Curve

Plots the average number of MBtu/hr of fuel input

needed per MW of output.
Heat-rate curve is the I/O curve scaled by MW
Best for most efficient coal
units is around 9.0

4
Incremental (Marginal) cost Curve

⚫ Plots the incremental $/MWh as a function of MW.

⚫ Found by differentiating the cost curve

5
Mathematical Formulation of Costs

⚫ Generator cost curves are usually not smooth.

However the curves can usually be adequately
approximated using piece-wise smooth, functions.
⚫ Two representations predominate
– quadratic or cubic functions
– piecewise linear functions
⚫ We'll assume a quadratic presentation

Ci ( PGi ) =  i +  PGi +  PGi

2
$/hr (fuel-cost)
dCi ( PGi )
ICi ( PGi ) = =  + 2 PGi $/MWh
dPGi
6
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

7
Incremental Cost Example, cont'd

If PG1 = 250 MW and PG2 = 150 MW Then

C1 (250) = 1000 +20  250 + 0.01  2502 = $ 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

8
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
m
Minimize CT =  Ci ( PGi )
i =1
Such that
m
Initially we'll
 PGi = PD + PLosses ignore generator
i=1 limits and the
losses
9
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, f (x) = 0
⚫ The gradient generalizes the first derivative for
multi-variable problems:

 f (x) f (x) f (x) 

f ( x ) =  , , ,
 x1 x2 xn 
10
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,λ ) = f (x) + λ T g (x)
Then a necessary condition for a minimum is the
L x (x,λ ) = 0 and L λ (x,λ ) = 0
11
Economic Dispatch Lagrangian

For the economic dispatch we have a minimization

constrained with a single equality constraint
m m
L(PG ,  ) =  Ci ( PGi ) +  ( PD −  PGi ) (no losses)
i =1 i =1
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

12
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 )
− = 15 + 0.06 PG 2 −  =0
dPG 2
500 − PG1 − PG 2 = 0
13
Economic Dispatch Example, cont’d
We therefore need to solve three linear equations
20 + 0.02 PG1 −  =0
15 + 0.06 PG 2 −  =0
500 − PG1 − PG 2 = 0
0.02 0 −1  PG1   −20 
 0 0.06 −1  PG 2  =  −15 
    
 −1 −1      −500 
 PG1   312.5 MW 
 P  =  187.5 MW 
 G2   
    26.2 $/MWh  14
Lambda-Iteration Solution Method

⚫ The direct solution only works well if the

incremental cost curves are linear and no generators
are at their limits
⚫ A more general method is known as the lambda-
iteration
– the method requires that there be a unique mapping
between a value of lambda and each generator’s MW
output
– the method then starts with values of lambda below and
above the optimal value, and then iteratively brackets the
optimal value
15
Lambda-Iteration Algorithm

Pick  L and  H such that

m m
 Gi ) − PD  0
P (  L
 Gi ) − PD  0
P (  H

i=1 i=1

While  H −  L   Do
 M = ( H +  L ) / 2
m
If  Gi
P (  M
) − PD  0 Then  H
=  M

i=1

Else  L =  M
End While
16
Lambda-Iteration: Graphical View
In the graph shown below for each value of lambda
there is a unique PGi for each generator. This
relationship is the PGi() function.

17
Lambda-Iteration Example

Consider a three generator system with

IC1 ( PG1 ) = 15 + 0.02 PG1 = $/MWh
IC2 ( PG 2 ) = 20 + 0.01PG 2 = $/MWh
IC3 ( PG 3 ) = 18 + 0.025 PG 3 = $/MWh
and with constraint PG1 + PG 2 + PG 3 = 1000 MW
Rewriting as a function of  , PGi ( ), we have
 − 15  − 20
PG1 ( ) = PG2 ( ) =
0.02 0.01
 − 18
PG3 ( ) =
0.025
18
Lambda-Iteration Example, cont’d
m
Pick  L so  Gi ) − 1000  0 and
P (  L

i=1
m
 Gi ) − 1000  0
P (  H

i=1
m
Try  L
= 20 then  PGi (20) − 1000 =
i =1
 − 15  − 20  − 18
+ + − 1000 = −670 MW
0.02 0.01 0.025
m
Try  H = 30 then  PGi (30) − 1000 = 1230 MW
i =1
19
Lambda-Iteration Example, cont’d

Pick convergence tolerance  = 0.05 $/MWh

Then iterate since  H −  L  0.05

 M = ( H +  L ) / 2 = 25
m
Then since  Gi
P (25) − 1000 = 280 we set  H
= 25
i =1
Since 25 − 20  0.05
 M = (25 + 20) / 2 = 22.5
m
 Gi
P (22.5) − 1000 = −195 we set  L
= 22.5
i =1 20
Lambda-Iteration Example, cont’d

Continue iterating until  H −  L  0.05

The solution value of  ,  , is 23.53 $/MWh

*

Once  * is known we can calculate the PGi

23.53 − 15
PG1 (23.5) = = 426 MW
0.02
23.53 − 20
PG2 (23.5) = = 353 MW
0.01
23.53 − 18
PG3 (23.5) = = 221 MW
0.025
21
Lambda-Iteration Solution Method

⚫ The direct solution only works well if the

incremental cost curves are linear and no generators
are at their limits
⚫ A more general method is known as the lambda-
iteration
– the method requires that there be a unique mapping
between a value of lambda and each generator’s MW
output
– the method then starts with values of lambda below and
above the optimal value, and then iteratively brackets the
optimal value
22
Generator MW Limits

⚫ Generators have limits on the minimum and

maximum amount of power they can produce
⚫ Often times the minimum limit is not zero. This
represents a limit on the generator’s operation with
the desired fuel type
⚫ Because of varying system economics usually many
generators in a system are operated at their
maximum MW limits.

23
Lambda-Iteration with Gen Limits

In the lambda-iteration method the limits are taken

into account when calculating PGi ( ) :
if PGi ( )  PGi ,max then PGi ( ) = PGi ,max
if PGi ( )  PGi ,min then PGi ( ) = PGi ,min

24
 Lambda-Iteration Gen Limit Example
In the previous three generator example assume
the same cost characteristics but also with limits
0  PG1  300 MW 100  PG2  500 MW
200  PG3  600 MW
With limits we get
m
 PGi (20) − 1000 = PG1 (20) + PG 2 (20) + PG 3 (20) − 1000
i =1
= 250 + 100 + 200 = −450 MW (compared to -670MW)
m
 PGi (30) − 1000 = 300 + 500 + 480 − 1000 = 280 MW
i =1 25
Lambda-Iteration Limit Example,cont’d
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). The presence of limits will always
cause  to either increase or remain the same.
Final solution is
PG1 (24.43) = 300 MW
PG2 (24.43) = 443 MW
PG3 (24.43) = 257 MW
26
Back of Envelope Values

⚫ Often times incremental costs can be 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 1.5 for coal, 4 for natural gas, 0.5 for
nuclear, probably 10 for fuel oil.
– Hydro, solar and wind costs tend to be quite low, but for
this sources the fuel is free but limited

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Thank You

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