### Economic Dispatch: Concepts, Practices and Issues

Presentation to the Joint Board for the Study of Economic Dispatch

FERC Staff

Palm Springs, California

November 13, 20052

Overview

• What is economic dispatch?

• Planning for tomorrow’s dispatch

• Dispatching the power system today

• Factors limiting the effectiveness of dispatch in minimizing customer

costs

• Issues for consideration in the joint board report

What is economic dispatch?

• The definition of economic dispatch pr ovided in EPAct section 1234 is:

“The operation of generation facilities to produce energy at the lowest cost to reliably serve consumers, recognizing any operational limits of generation and transmission facilities.”

• Most electric power systems dispatch their own generating units and their own purchased power in a way that may be said to meet this definition.

• There are two fundamental com ponents to economic dispatch:

o Planning for tomorrow’s dispatch

o Dispatching the power system today3

Planning for Tomorrow’s Dispatch

• Scheduling generating units for each hour of the next day’s dispatch

o Based on forecast load for the next day

o Select generating units to be r unning and available for dispatch the next day (operating day)

o Recognize each generating unit’s operating limit, including its:

 Ramp rate (how quickly the generator’s output can be changed)

 Maximum and minimum generation levels

 Minimum amount of time the generator must run

 Minimum amount of time the generator must stay off

once turned off

o Recognize generating unit characteristics, including:

 Cost of generating, which depends on:

• its efficiency (heat rate)

• its variable operating costs (fuel and non-fuel)

 Variable cost of environmental compliance

 Start-up costs

o Next day scheduling is typica lly performed by a generation group or an independe nt market operator

• Reliability Assessment

o Analyze forecasted load and tran smission conditions in the area to ensure that scheduled gene ration dispatch can meet load reliably.

o If the scheduled dispatch is not f easible within the limits of the transmission system, revise it.

o This reliability assessment is typically performed by a transmission operations group4

Dispatching the Power System Today

• Monitor load, generation and interc hange (imports/exports) to ensure balance of supply and load

o Monitor and maintain system fre quency at 60 Hz during dispatch according to NERC standards, using Automatic Generation Control (AGC) to change gene ration dispatch as needed

o Monitor hourly dispatch schedules to ensure that dispatch for the

next hour will be in balance

• Monitor flows on transmission system

o Keep transmission flows within reliability limits

o Keep voltage levels w ithin reliability ranges

o Take corrective action, when needed, by:

 Limiting new power flow schedules

 Curtailing existing power flow schedules

 Changing the dispatch

 Shedding load

• This monitoring is typically performed by the transmission operator5

Area Factors Limiting the Effectiv eness of Dispatch in Minimizing

Customer Costs

• Geographic area included

The size of the geographic region over which the dispatch occurs affects the level of costs: that is, wh ich generation resources and which transmission facilities are considered in planning and economic dispatch.

• Generation resources included

Which generation resources in the ar ea are included in the planning and economic dispatch, and whether they are included in the same manner,

affects the level of costs.

• Transmission facilities included

What transmission facilities are included in the planning and economic dispatch, and how the reliability security limits of the transmission facilities are incorporated in to the economic dispatch.6

Implementation Factors Limiting Effectiveness of Dispatch in Minimizing Customer Costs

• Frequency of the dispatch

Performing an economic dispatch more frequently (e.g., 5 or 15 minutes rather than each hour) affects the level of costs.

• Communication of information

Generation operators, transmission owne rs, and load serving entities must provide accurate and current info rmation to those performing the planning and dispatch functions.

Those performing planning and disp atch must provide accurate and current dispatch instructions to generation operators, transmission operators and load se rving entities.

Inadequate or incomplete communications affects the level of costs of the economic dispatch.

• Software tools for dispatch and information

Reliable and secure computer software is essential for rapidly responding to system changes to maintain power system reliability, while selecting the lowest cost generators to dispatch.

Obsolete software affects the level of costs achieved by the economic dispatch.

• Coordination of dispatch across regions

Where there are multiple, independe ntly performed, dispatches in a region, the effectiveness of c oordination agreements and their implementation affect the level of costs of the economic dispatch.7

Issues for Consideration in the Joint Board Report

• What is the current practice of econo mic dispatch in each region, and what is the scope of this dispatch?

• What improvements could be considered?

• What are the potential benefits and costs of those improvements?

• How would those improvements affect reliability?

• Are there institutional, regulatory, or statutory impediments to the identified improvements?