119 32nd ORSNZ Conference Proceedings

An Integrated Approach to Modeling

Power Station Energy and Reserve
Dispatch
G lenn R. D rayton-B right and E. G rant R ead
D epartm ent o f M anagem ent
U niversity o f C anterbury

A bstract
F or the N ew Z ealand po w er system , provision o f reserve is the second highest genera­
tion cost after m eeting o f system load. T his im plies that there is a need for efficient
scheduling o f reserve, and a potentially significant m arket for reserve in a decentralised
dispatch environm ent. T his paper presents an LP m odeling fram ew ork for offering e n ­
ergy and reserve in to a m arket clearing process. P rovision is m ade for hydro and th er­
m al station ow ners to co m m unicate efficiency effects and physical lim its im plied by the
jo in t provision o f energy and reserve. T he general fram ew ork is developed to co v er all
sources o f reserve including interruptible load, hydro and therm al partially loaded re­
serve and tail-w ater dep ressed plant.

1 Introduction
R eserve generation is spare capacity carried on running units, called partially loaded
spinning reserve (PL SR ), and other facilities, such as tail-w ater depressed (T W D j plant
and in terruptible load, that can deliver generation in the event o f an unexpected plant
failure, or som e o th er contingency, that creates a tem porary dem and-load im balance. It
is planned that the daily reserve dispatch be included w ith the energy dispatch in the
forthcom ing N ew Z ealand w holesale electricity m arket. T here is a need for an in te­
grated and efficien t fram ew ork for reserve offering and dispatch. T his paper presents an
approach b ased on earlier w ork in m odeling the optim al response o f a station to energy
and reserve coord in atio n signals, w hich resulted in an approach called the “fan ap­
p ro x im atio n ” [ 1 ],
W hen con sid erin g any form o f reserve, there are three key features o f reserve d eliv ­
ery that need to be com m u n icated in an offer design: price dependency, generation d e­
pendency and tim e dependency. T his paper concentrates on the representation o f price
d ependency and generation dependency in dispatch offers. T he ideal treatm ent o f tim e
d ependency rem ains an open research issue, but the offer form presented here is d e­
signed to b e com p atib le w ith m any o f the approaches proposed at this tim e. W e c o n ­
centrate on the form o f hydro station offers, since therm al and interruptible load offers
are sim ilar but som ew hat sim pler.
W e assum e that a linear program w ill be used to determ ine the offers accepted by the
m arket. On the energy side, only a sim ple supply curve is allow ed but, on the reserve
side, additional L P constraints are perm itted. In term s o f the tim e dependency issue, we
assum e that the tim e fram e(s) w ithin w hich reserve is required, t, is an exogenous c o n ­
stant.
32nd ORSNZ Conference Proceedings 120

In S ection 2, w e first co nsider a hydro generator offering energy in a series o f steps of

capacity G 1 at price C J and PLSR . Section 3 extends this, to cover offering o f energy,
P L S R and T W D . F inally, Section 4 presents a num erical exam ple.

2 Partially Loaded Spinning Reserve Offers

F igure 1 is a rep resen tatio n o f all possible output and spare capacity com binations for a
hydro station. T he d ashed diagonal lines m ark the breakpoints for 1,2,3,... units and the
d ash ed vertical lines split the available energy into tranches o f increasing offer price.
E ach ray co rresp o n d s to a particular ratio o f energy to reserve. O f particular interest are
the rays co rresp o n d in g to the unit m axim um efficiency operating point, e, and the
m ax im u m d eliv erab le reserve point.
C o n sid er the situation o f a m ulti-unit hydro station offering into the energy m arket.
Ignoring reserve, the g enerator offers bands o f generation, as in Figure 1. If those offers
are accepted, it w ill actually generate at peak efficiency, w here possible, along the curve
A BC . T h u s som e reserve could be provided at no extra cost, as show n by the point
(g ; r = g e ), w here g is the accepted energy offer. If the tim e-fram e in w hich reserve is
req u ired is short, this p otential m ay not be realisable, even if generation w ere m ain­
tained at the efficien t points. T hen, the m axim um response possible w ould lie along a
lo w er ray, such as A D . C onversely, if there is enough response tim e available, and the
g enerator is prepared to operate b e lo w the efficient points, m ore reserve could be m ade
available up to ray A E 1. T his situation could be expressed by the generator including,
along w ith the steps in its energy offer, the reserve available in various tim e fram es, as a
fu n c tio n o f that generation.
In the absence o f a reserve price, the only econom ic operating points lie along the
curve A B C . Im agine a g enerator that w ould w ant to operate at C, at the energy m arket
clearin g price, b u t is ‘constrained o f f tow ards B to provide m ore PLSR . T hey w ould
ex p ect to be co m p en sated at least for the profit foregone on the energy m arket. A lterna­
tively, th ey m ig h t be o perating along the AB segm ent and then ‘constrained o n ’ tow ards
B, to pro v id e m ore PLSR . In this case, they w ill expect to be com pensated at least for
the loss incurred by th at ex tra generation. Further, they could be asked to generate in
the A E B region, in order to provide m ore reserve, in w hich case they w ould also require
co m p en satio n for the ex tra cost associated w ith operating inefficiently. T his w ould be
ex p ressed in th eir o ffer as an increasing scale o f fees for w edges betw een AB and AE'.
T h is ‘co m p en satio n ’ is em bodied in the reserve price, calculated by the m arket
clearing LP. E very reserve provider will receive the sam e price for e v e r y unit o f reserve
and, by defin itio n , this w ill a t le a s t com pensate any individual generator for the cost of
pro v id in g reserv e as stated in their offer, including any ‘co m p en satio n ’ for being co n ­

1 Note this corresponds to ‘caps’ on the reserve response of each unit. Where units are offered on an in­
dividual basis, a simple upper bound would perform the same function. This occurs with thermal units,
although these have an upward sloping offer segment too because it can be difficult to supply substantial
reserve from low generation levels.
2 In practice, the generator may not be prepared to provide any reserve purely on the basis of the compen­
sation, since this provides no reward or incentive for building or maintaining plant with capability. So they
may also want to specify a fee for reserve in the ABC region. However, for simplicity we will assume that
the first ‘band’ of the reserve offer is made at ‘compensation only’ with higher bands offered at a fee on a
per MW basis.
 121 32nd ORSNZ Conference Proceedings

strained o ff o r on, and any interruptible load for their stated cost o f being on standby. As
in the energy m arket, there w ill exist in the system a ‘m arginal reserve p ro v id er’, w ho
sets the price o f reserve for the system and for w hom the reserve price w ill exactly co m ­
pensate them for the co st o f their m ost expensive accepted reserve offer.
In sum m ary then, for each response tim e t, there w ould be a schedule o f reserve fees
F 1, F2, ... for each b and o f PLSR offered, w ith F ! = 0.0 representing com pensation only.
T hese bands, r 1, r2,... will be specified as increm ental reserve proportions (IR P ) I R P 1,
IR P 2, .. . o f the generation offer accepted. C harging for reserve in this m anner is feasi­
ble, in an L P sense, p rovided the fees are m onotonically increasing w ith reserve.

3 TWD Plant Offers

A unit capable o f T W D o peration can m otor ‘in a ir’ draw ing a sm all am ount o f pow er in
the process, but, being quickly available for on-line operation w hen required. H ydro
generators m ay offer reserve from T W D on som e, or all o f their units. T hey w ill require
an offer form that allow s them to recover the short run costs o f m otoring units, and, in
the long run, attem pt to reco ver the capital costs involved3.
C o n sid er a station at w hich only som e units can provide T W D . In F igure 2, im agine
that som e level o f g has been set, and that the first block o f PLSR , available w ithout any
ex plicit fee, p rovided the g enerator is com pensated for ‘opportunity c o st’, has been ac­
cepted, as has the second block, available for com pensation plus an additional fee. T hus
the en erg y /P L S R position lies som ew here along the curve A EC.
R eferring to F igure 2, a block o f T W D , A FG E , is also available at som e fee higher
than that for P L S R along ray AE. If generation is low , it w ill be possible to reserve all
T W D units for that purpose, along the line FG. O therw ise, the availability o f units w ill
be restricted by the energy/P L S R requirem ents, falling along the line GE. B eyond E, no
T W D is available. In the special case w here all units can provide T W D , F = G w ill rep ­
resent all units com m itted to T W D , and reserve availability w ill fall continuously from
there.
T hus, if w e suppose that, given the energy m arket clearing price found by the LP, the
generator w o uld have w anted to generate at, say, full output C, but w as constrained off
to K so as to provide H K for reserve purposes, then it should be paid at least the energy
price for g = A K , com pensation for all profitable generation foregone K C, plus its
nom inated fee for the inefficient generation required to m eet PL S R com m itm ents o f IJ
and its n om inated fee for the T W D com m itm ent o f HI.
T he representation given above rem ains valid, provided the additional fee for T W D
exceeds the additional fee for all PLSR segm ents. O therw ise, the sam e basic approach
will w ork, b u t T W D should be represented as lying betw een the P L S R segm ents w hich
have a low er fee, and those w hich have a higher fee, as in Figure 3. Since both fees are
additional to any co m pensation, it does not m atter w hether the g enerator specifies T W D
in a separate offer, or includes it as a step in an integrated offer. W hat does m atter,
though, is that each T W D step consists o f a m axim um quantity T" at a fee M " ,
w hereas the P L S R steps are proportional to generation dispatched.

3 We will ignore the fact that TWD can only be supplied in whole units, and assume that some practical
rule will be adopted to round the continuous LP solution to the nearest integer number of units.
32nd ORSNZ Conference Proceedings 122

Incre m e n ta l Energy O ffer

T ro n che 1 , T ranche 2 , T ranche 3 , Tranche 4 , T ranche 5

100
P o te ntia l (MW)

O pe ra tion below
60 m a x. reserve
PLS re (n o t fe a sib le )
fo r gh t

O peration
between m ax.
Reserve

40 reserve w ithin
tim e t ond
m ax. e fficie n cy

O peration
between m ax.
e ffic ie n c y and
20 B, slope
m a x. o u tp u t
PLS reserve
pa b ility fo r low t

A
r i i i i '
0 20 (g ,0 ) 60 80 100
O u tp u t (MW)

Figure 1 Fan approximation graphs for the integrated offer of energy and PLSR

In cre m e n ta l Energy O ffer

100

O p e ro tio n below
m a x. re se rve
(n o t o ffe re d )
P o te ntia l (MW)

TWD a vo iia b le
F fo r a h ig h e r
fee

PLSR a va ila b le
fo r
Reserve

c o m p e n s a tio n
plu s a fee

PLSR a vo iia b le
fo r
c o m p e n s a tio n
20 o nly

O u tp u t (MW)

Figure 2 Fan approximation graph for an integrated offer of energy, PLSR and TWD
 123 32nd ORSNZ Conference Proceedings

In all cases the LP w ill be convex, having an offer w hich is m onotone in both reserve
and energy. Finally, in order to account for the differing response characteristics of
PLSR and T W D , the o ffer schedule for different tim e fram es m ay look rather different,
w ith the full T W D response probably appearing as a block once t exceeds som e critical
level. T he L P equ atio n s representing an offer for a station are show n in T able 1.

J M N (0)
Minimise
g‘,rm,t' >0 t"
,= 1 m=1 n=\
subject to
J M N
( 1)
< G
j= l m=l n=l

8J < G ’ V; (2)

Vm (3)
r m < IRP" is '
j =i
tn < f" Vn (4)

Table 1 Section of the integrated energy and reserve market clearing LP for a hydro station

4 Numerical Example
T his exam ple offers a single T W D block, t ' , betw een tw o PLSR w edges r' and r 2 .
T able 2 show s the integrated energy and reserve offer, and how it is taken up by the
m arket clearing L P for an energy price o f $25.00/M W , and reserve prices ranging from
$0.00 to $3.25/M W .

E n erg y
Tranche (j) 1 2 3 4 5
a S0.00 /MW $23.00/MW $23.50/MW $24.00 /MW $24.50 /MW
Gi 20 MW 20 MW 20 MW 20 MW 20 MW

R e se rve
Wedge (m) Offer (IR P") Fee (F")
r' 11.1% $0.80 /MW
r2 89.9% $1.20 /MW

Block (n) Fee (M") Limit( T" )

t 1 $1.00 /MW 60 MW

Table 2 Example hydro station offer with TWD priced between two PLSR bands

R eferring to F igure 3, note how the T W D block appears betw een the r and r w edges,

so the increm ental reserve offer, show n in the colum n graph, starts w ith r ] for the first
10.0 M W , then increases T W D over the range o f reserve prices from $1.30 to $3.03
w hile slightly d ecreasing r 1. Follow ing this, the r tranche is taken up, increasing the

total reserve b ut further reducing r . M axim um reserve is 80.0 M W — a com bination o f

all three reserve p arts— and is achieved at a reserve m arket clearing price o f $3.25.
T able 3 show s the cost o f the offer taken up, and the energy and reserve paym ents m ade
32nd ORSNZ Conference Proceedings 124

to the station. N ote that the total paym ents fall as energy is reduced but the profit in ­
creases m o n otonically.

Figure 3 Set of market clearing solutions for an energy market clearing price of $25.00
and various reserve market clearing prices traced on the fan-approximation graph

1 Incremental
Point on Cost o f Total Cost Energy Reserve
Figure Energy PLSR TWD Reserve o f Offer Payment Payment Profit
A lo o t 0 0 $ $ 1,900.00 $ 2,500.00 $ $600.00
B 90S 10 0 $ 1.30 $ 1,663 00 $ 2,250.00 $ 13.00 $600.00
C 80 8.89 $ 1.53 $ 1,428.22 $ 2,000.00 $ 30.60 $ 602.38
D 60 6.7 33.3 $ 2.03 S 968.67 $ 1.500 00 $ 81.00 $612.33
E 40 4.4 55.6 $ 2.53 $ 519.11 $ 1,000.00 $ 151.50 $ 632.39
F 36 4 $ 3.03 $ 431.20 $ 900.00 $ 193.66 $ 662.46
G 20 i 20 60 $ 3.25 $ 83.11 $ 500.00 $ 259.60 $ 676.49

Table 3 Energy and reserve mix and station profit for an energy market
clearing price of $25.00 and various reserve market clearing prices

R eferences
[1] G. R. D rayton-B right, E n e rg y a n d R e s e r \’e C o o rd in a tio n in a D e c e n tr a lis e d M a rk e t,
P hD thesis, D ep artm en t o f M anagem ent, U niversity o f C anterbury, 1996.