Since all the generating units that are online have different costs of generation, it is necessary to find the generation levels of each of these units that would meet the load at the minimum cost. This has to take into account the fact that the cost of generation in one generator is not proportional to its generation level but is a nonlinear function of it.

In addition, since the system is geographically spread out, the transmission losses are dependent on the generation pattern and must be considered in obtaining the optimum pattern. Certain other factors have to be considered when obtaining the optimum generation pattern.

One is that the generation pattern provide adequate reserve margins. This is often done by constraining the generation level to a lower boundary than the generating capability. A more difficult set of constraints to consider are the transmission limits.

Under certain real-time conditions it is possible that the most economic pattern may not be feasible because of unacceptable line flows or voltage conditions. The present-day economic dispatch (ED) algorithm cannot handle these security constraints.

However, alternative methods based on optimal power flows have been suggested but have not yet been used for real-time dispatch. The minimum cost dispatch occurs when the incremental cost of all the generators is equal.

The cost functions of the generators are nonlinear and discontinuous. For the equal marginal cost algorithm to work, it is necessary for them to be convex. These incremental cost curves are often represented as monotonically increasing piecewise-linear functions.

A binary search for the optimal marginal cost is conducted by summing all the generation at a certain marginal cost and comparing it with the total power demand. If the demand is higher, a higher marginal cost is needed, and vice versa.

This algorithm produces the ideal setpoints for all the generators for that particular demand, and this calculation is done every few minutes as the demand changes.

The losses in the power system are a function of the generation pattern, and they are taken into account by multiplying the generator incremental costs by the appropriate penalty factors. The penalty factor for each generator is a reflection of the sensitivity of that generator to system losses, and these sensitivities can be obtained from the transmission loss factors.

This ED algorithm generally applies to only thermal generation units that have cost characteristics of the type discussed here. The hydro units have to be dispatched with different considerations. Although there is no cost for the water, the amount of water available is limited over a period, and the displacement of fossil fuel by this water determines its worth.

Thus, if the water usage limitation over a period is known, say from a previously computed hydro optimization, the water worth can be used to dispatch the hydro units. LFC and the ED functions both operate automatically in realtime but with vastly different time periods.

Both adjust generation levels, but LFC does it every few seconds to follow the load variation, while ED does it every few minutes to assure minimal cost. Conflicting control action is avoided by coordinating the control errors.

If the unit control errors from LFC and ED are in the same direction, there is no conflict. Otherwise, a logic is set to either follow load (permissive control) or follow economics (mandatory control).

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