1

Least Cost System Operation:

Economic Dispatch 2
Smith College, EGR 325
March 10, 2006
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Overview
Complex system time scale separation
Least cost system operation
Economic dispatch first view
Generator cost characteristics
System-level cost characterization
Constrained optimization
Linear programming
Economic dispatch completed
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Time Scale Separation
1. Decide what to build
2. Given the plants that are built decide
which plants to have warmed up and
ready to go this month, week...
3. Given the plants that are ready to
generate decide which plants to use to
meet the expected load today, the next 5
minutes, next hour...
4. Given the plants that are generating
Decide how to maintain the supply and
demand balance cycle to cycle
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Economic Dispatch Recap
Economic dispatch determines the best
way to minimize the current generator
operating costs
Economic dispatch is not concerned with
determining which units to turn on/off (this
is the unit commitment problem)
Economic dispatch ignores the
transmission system limitations
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Constrained Optimization
& Economic Dispatch
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Mathematical Formulation of Costs
Generator cost curves are not actually smooth
Typically curves can be approximated using
quadratic or cubic functions
piecewise linear functions
2
( ) $/hr (fuel-cost)
( )
( ) 2 $/MWh
i Gi i Gi Gi
i Gi
i Gi Gi
Gi
C P P P
dC P
IC P P
dP
o |
|
= + +
= = +
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Mathematical Formulation of Costs
The marginal cost is one of the most important
quantities in operating a power system
Marginal cost = incremental cost: the cost of
producing the next increment (the next MWh)
How do we find the marginal cost?
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Economic Dispatch
An economic dispatch results in all the
generator generating at a level where they
have equal marginal costs (for a lossless
system)

IC
1
(P
G,1
) = IC
2
(P
G,2
) = = IC
m
(P
G,m
)
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Incremental Cost Example
2
1 1 1 1
2
2 2 2 2
1 1
1 1 1
1
2 2
2 2 2
2
For a two generator system assume
( ) 1000 20 0.01 $/
( ) 400 15 0.03 $/
Then
( )
( ) 20 0.02 $/MWh
( )
( ) 15 0.06 $/MWh
G G G
G G G
G
G G
G
G
G G
G
C P P P hr
C P P P hr
dC P
IC P P
dP
dC P
IC P P
dP
= + +
= + +
= = +
= = +
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G1 G2
2
1
2
2
1
2
If P 250 MW and P 150 MW Then
(250) 1000 20 250 0.01 250 $ 6625/hr
(150) 400 15 150 0.03 150 $6025/hr
Then
(250) 20 0.02 250 $ 25/MWh
(150) 15 0.06 150 $ 24/MWh
C
C
IC
IC
= =
= + + =
= + + =
= + =
= + =
Incremental Cost Example
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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
T
1
m
i=1
Minimize C ( )
Such that
m
i Gi
i
Gi D Losses
C P
P P P
=
= +

Initially we'll
ignore generator
limits and the
losses
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Unconstrained Minimization
This is a minimization problem with a
single inequality constraint
For an unconstrained minimization a
necessary (but not sufficient) condition for
a minimum is the gradient of the function
must be zero,
The gradient generalizes the first
derivative for multi-variable problems:
1 2
( ) ( ) ( )
( ) , , ,
n
x x x
( c c c
V
(
c c c

f x f x f x
f x
( ) V = f x 0
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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 ( ) s.t. ( )
We define the Lagrangian L( , ) ( ) ( )
Then a necessary condition for a minimum is the
L ( , ) 0 and L ( , ) 0
T
=
= +
V = V =
x
f x g x 0
x f x g x
x x
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Economic Dispatch Lagrangian
G
1 1
G
For the economic dispatch we have a minimization
constrained with a single equality constraint
L( , ) ( ) ( ) (no losses)
The necessary conditions for a minimum are
L( , )
m m
i Gi D Gi
i i
Gi
C P P P
dC
P

= =
= +
c
=
c

P
P
1
( )
0 (for i 1 to m)
0
i Gi
Gi
m
D Gi
i
P
dP
P P

=
= =
=

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Economic Dispatch Example
D 1 2
2
1 1 1 1
2
2 2 2 2
1 1
1
What is economic dispatch for a two generator
system P 500 MW and
( ) 1000 20 0.01 $/
( ) 400 15 0.03 $/
Using the Largrange multiplier method we know
( )
20 0
G G
G G G
G G G
G
G
P P
C P P P hr
C P P P hr
dC P
dP

= + =
= + +
= + +
= +
1
2 2
2
2
1 2
.02 0
( )
15 0.06 0
500 0
G
G
G
G
G G
P
dC P
P
dP
P P

=
= + =
=
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Economic Dispatch Example, contd
1
2
1 2
1
2
1
2
We therefore need to solve three linear equations
20 0.02 0
15 0.06 0
500 0
0.02 0 1 20
0 0.06 1 15
1 1 0 500
312.5 MW
187.5 MW
26.2 $/MW
G
G
G G
G
G
G
G
P
P
P P
P
P
P
P

+ =
+ =
=

( ( (
( ( (
=
( ( (
( ( (

(
(
=
(
(

h
(
(
(
(

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Constrained Optimization &
Linear Programming
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Linear Programming Definition
Optimization is used to find the best
value
Best defined by us, the analysts and
designers
Constrained opt Linear programming
Linear constraints
Complicates the problem
Some binding, some non-binding
Visualize via a feasible region
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Formulating the Problem
Objective function
Constraints
Decision variables
Variable bounds
Standard form
min cx
s.t. Ax = b
x
min
<= x <= x
max

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Formulating the Problem
For power systems:
min C
T
= C
i
(P
Gi
)

s.t. (P
Gi
) = P
L

P
Gi min
<= P
Gi
<= P
Gi max

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Constrained Optimization
& Economic Dispatch
The Lagrangean
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Formulating the Lagrangean
Rewrite the constrained optimization
problem as an unconstrained optimization
problem !
Then we can use the simple derivative
(unconstrained optimization) to solve
The task is to interpret the results correctly
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We are minimizing gradients of both
multivariate equations
C
T
& P
Gi
= P
L
For both equations to be at a minimum
these gradients must be linearly dependent
vectors
VCT Vw = 0
with w P
G
P
L
= 0
The Lagrangean multiplier
is defined to be the scaling variable that
brings VC
T
and Vw into linear alignment
Formulating the Lagrangean
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max g(x) = 5x
1
2
x
2
s.t. h(x) = x
1
+ x
2
= 6 or x
1
+ x
2
6 = 0

Formulate L =
L = g(x) h(x)
Find ?
dL/dx
1
, dL/dx
2
, dL/d
x
1
= 4, x
2
= 2, = 80
Lagrangean Example
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min C
T
= C
i
(P
Gi
)

s.t. (P
Gi
) = P
L

P
Gi min
<= P
Gi
<= P
Gi max


Then L = ?



Economic Dispatch & the Lagrangean
( )
L Gi T
P P C L E =
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Economic Dispatch Example
D 1 2
2
1 1 1 1
2
2 2 2 2
1 1
1
What is economic dispatch for a two generator
system P 500 MW and
( ) 1000 20 0.01 $/
( ) 400 15 0.03 $/
Using the Largrange multiplier method we know
( )
20 0
G G
G G G
G G G
G
G
P P
C P P P hr
C P P P hr
dC P
dP

= + =
= + +
= + +
= +
1
2 2
2
2
1 2
.02 0
( )
15 0.06 0
500 0
G
G
G
G
G G
P
dC P
P
dP
P P

=
= + =
=
What is the economic dispatch for the two
generator problem with
P
G1
+ P
G2
= P
D
= 500MW


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Economic Dispatch Example
D 1 2
2
1 1 1 1
2
2 2 2 2
1 1
1
What is economic dispatch for a two generator
system P 500 MW and
( ) 1000 20 0.01 $/
( ) 400 15 0.03 $/
Using the Largrange multiplier method we know
( )
20 0
G G
G G G
G G G
G
G
P P
C P P P hr
C P P P hr
dC P
dP

= + =
= + +
= + +
= +
1
2 2
2
2
1 2
.02 0
( )
15 0.06 0
500 0
G
G
G
G
G G
P
dC P
P
dP
P P

=
= + =
=
Formulate the Lagrangean
Take derivatives
Solve

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Economic Dispatch Example, contd
1
2
1 2
1
2
1
2
We therefore need to solve three linear equations
20 0.02 0
15 0.06 0
500 0
0.02 0 1 20
0 0.06 1 15
1 1 0 500
312.5 MW
187.5 MW
26.2 $/MW
G
G
G G
G
G
G
G
P
P
P P
P
P
P
P

+ =
+ =
=

( ( (
( ( (
=
( ( (
( ( (

(
(
=
(
(

h
(
(
(
(

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Economic Dispatch: Formulation
We find that
P
G1
= 312.5MW;
P
G2
= 187.5MW
= $26.2/MWh
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Discussion
Key results for Economic Dispatch?
Incremental cost of all generating units is
equal
This incremental cost is the Lagrangean
multiplier,
is called the System and is the system-
wide cost of generating electricity
This is the price charged to customers
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Power System Control Center
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Power System Control Center
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New England Power Grid Operator
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Regional Prices and Constraints

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The Hong Kong Trade Development Council
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Summary
Economic dispatch is used to determine
the least cost means of using existing
generating plants to meet electric demand
To calculate the economic dispatch for a
power system, the techniques of linear
programming + the Lagrangean are used

Now to a review of the production cost
homework results...