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Power System Operation in Power System Restructuring:

Competitive Environment
Process of Disassembling the power
industry and reassembling it into modified
functional organization
Brings better results in terms of
performance and efficiency
By
It is achieved by deregulating the
Saikrishna Dasari electrical utilities
Dept. of EEE
Regulated and Deregulated power
PVKKIT
systems
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Major Factors Motivating the


Restructuring High Tariff:

High Tariff The Price of electricity is expansive on


account of regulated Power system
With deregulation, the tariff is most likely
Encouragements for innovations
to reduce
Restructuring Leads to a number of
Improvement in managerial efficiencies competitors in the market
Consumers enjoy an improved & quality
power at less tariff
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Improved Managerial
Encouragement of Innovations: Efficiencies

Innovations leads to upgradation of Restructuring, improved the quality in the


technologies & business practices managerial economics of the power sector
In deregulated power system, because of
competitive power industry, the risk The Govt. owned electricity industries
takers are rewarded and encouraged encouraged privatization, even
Regulated system never cared for privatization is not a part of restructuring
innovative approach. process

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Models of Electricity Markets PoolCo Model:

PoolCo model A centralized market place, where electric


power sellers/buyers submit the prices
Bilateral Contracts model and bids into the pool for the energy that
they are agreeable to sell/buy is known as
“PoolCo model”
Hybrid Model It does not contain any generation or
transmission components & within service
authority of the pool it transmits all
generating units
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Bilatral Contracts model: Hybrid Model:

Also known as direct access models This model is the combination of different
Consumers can contract directly with the characteristics of above two models
generating companies It differs form PoolCo model, the use of
Consumers transmits required power by power exchange is not necessary
forming suitable approach & pricing Consumers are permitted to sing bilatral
standards as conformed to the power contracts & choose suppliers from the
transmission and distribution over utility pool
wires
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ISO: Power Exchange (PX)

Independent System Operation A market place where different


participants buy/sell electricity and can do
Main responsibility is to manage the other services in a competitive manner by
accepting certain terms such as pricing,
security of power system
availability and quantity of products is
It does not support or penalize one known as “Power Exchange”

market participant over other in a


competitive environment
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Market Clearing Price:
Market Power:
Ability of a firm to increase or control the The market place at
market price over a competitive level which the quantity of
energy supplied matches
Spot Market: the quantity of energy
It is a market where the buyers and demand & the buyers
sellers interact & agree either mutually or and sellers can agree on
through an exchange on transmission for that price is known as
immediate delivery “Market Clearing Price
(MCP)”
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Day-ahead & Hour-ahead


Market Operations: Markets

There are two types of market operations These are combinely called as forward
markets
Day-ahead & Hour-ahead Markets Here MCPs and electric quantities are
determined independently for every hour
Elastic & Inelastic Markets of the day depending upon the participant
bids

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Elastic & Inelastic Markets: Congestion Pricing methods:

A market in which a small change in price By employing suitable approaches all
may lead to a greater change in demand restructuring schemes are considering
is known as “Elastic Market” and demand congestion cost into account in order to
is said to be elastic calculate the congestion costs and assign
The market in which a drastic change in these costs to the users of transmission
price may not cause any change in system
demand is known as “Inelastic Market” Based on the following three basic
and the demand is said to be inelastic methods these approaches are evolved as
demand follows
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(i) Cost of Out-of-merit dispatch: (ii) Locational Marginal Prices

This is suitable for a system having This technique depends on the supplying
invaluable problems of transmission energy cost to the succeeding load at a
problems particular location on the transmission
grid
In this approach, based on the load ratio It evaluates the price paid for energy by
share of transmission system congestion buyers in a competitive market at
costs are assigned to each load particular locations & by observing the
variations in LMPs between two locations
congestion costs are measured
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(iii) Usage Charges of Inter- Forward Pricing Curves:


zonal lines Construction
Based on the historical performance of the
constrained transmission paths, the ISO
region is classified into congestion zones, The construction of forward pricing curves
inter-zonal lines mainly depends on,
All transmission users pay usage charges Time frame for price curves
for using the inter-zone lines
In order to increase or decrease generation Types of forward price curves
the usage charges will be calculated from
bids submitted by the market participants
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Time frame for price curve Time frame for price curve

Construction of forward curve mainly Medium term price alterations would be


depends on a time frame which can be for determined by the factors such as load
a short-term, medium term or for a long growth, changes in fuel price & consumer
term response to change in retail power
In short-term, the electricity price varies The construction of forward curves for
with the fluctuations in weather long-term prices mainly depends on the
conditions, interregional power flows & probabilistic system modeling, retirement
supply outages analysis & asset investment
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Types of forward price curves: (i) Backwardation:
The forward electricity price plays a major
role for pricing retail & wholesale electricity It is a market condition in which the spot
price exceeds the future prices
The use of these curves by knowing the
information such as consumer characteristics It also known as inverted market
& supply/demand conditions, gives rise to It gives the relation between forward and
hedging strategies for various participants of spot market in which the shorter dated
market like marketers, suppliers & constracts deals with higher price & the
independent power suppliers longer dated constracts deals market with
The curve includes three variations lower price
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(ii) Contango: (iii) Combination:


The combination of backwardation &
It is opposite to the backwardation contango is shown
It gives the relation between forward and This is an example of a condition in which
spot market in which the forward price the forward curves takes form of
exceeds the spot price backwardation in the short-term part of
Usually the forward price is more than the the curve it is o combination of two
spot price by nearly the net cost carry (or) The curve behavior on expectations with
finance the spot electricity/security until respect to the supply or demand balance
the forward constracts settlement date in the market besides the other seasonal
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