Economic Dispatch

Generator Cost Curves

 Generator costs are typically represented by up to four different

curves
– input/output (I/O) curve
– fuel-cost curve
– heat-rate curve
– incremental cost curve
 For reference
- 1 Btu (British thermal unit) = 1054 J
- 1 MBtu = 1x106 Btu
- 1 MBtu = 0.293 MWh
- 3.41 Mbtu = 1 MWh

2
I/O Curve

 The IO curve plots fuel input (in MBtu/hr) versus net MW output.

3
Fuel-cost Curve

 The fuel-cost curve is the I/O curve scaled by fuel

cost. Coal prices vary; around $1/Mbtu to $2/Mbtu

4
Heat-rate Curve

Plots the average number of MBtu/hr of fuel input

needed per MW of output.
Heat-rate curve is the I/O curve scaled by MW
Best for most efficient coal
units is around 9.0

5
Incremental (Marginal) cost Curve

 Plots the incremental $/MWh as a function of MW.

 Found by differentiating the cost curve

6
Mathematical Formulation of Costs

 Generator cost curves are usually not smooth.

However the curves can usually be adequately
approximated using piece-wise smooth, functions.
 Two representations predominate
– quadratic or cubic functions
– piecewise linear functions
 In 476 we'll assume a quadratic presentation
Ci ( PGi )   i   PGi   PGi2 $/hr (fuel-cost)
dCi ( PGi )
ICi ( PGi )     2 PGi $/MWh
dPGi
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Coal

• Four Types of Coal

• Anthracite (15,000 Btu/lb), Eastern Pennsylvania; used mostly for heating because of its high value and cost
• Bituminous (10,500 to 15,000 Btu/lb), most plentiful in US, used extensively in electric power industry; mined in Eastern US including
Southern Illinois.
• Subbitunminous (8300 to 11,500 Btu/lb), most plentiful in Western US (Power River Basin in Wyoming); used in electric power
industry
• Lignite or brown coal (4000 to 8300 Btu/lb), used in electric power industry
• Coals differ in impurities such as sulfur content

8
9
Coal Prices

At $50 per ton and 11,800 Btu/lb, Illinois coal costs $2.12/Mbtu.
Transportation by rail is around $0.03/ton/mile
Source: US EIA 10
 Coal Usage Example

A 500 MW (net) generator is 35% efficient. It is being

supplied with Western grade coal, which costs $1.70
per MBtu and has 9000 Btu per pound. What is the
coal usage in lbs/hr? What is the cost?
At 35% efficiency required fuel input per hour is
500 MWh 1428 MWh 1 MBtu 4924 MBtu
  
hr  0.35 hr 0.29 MWh hr
4924 MBtu 1 lb 547,111 lbs
 
hr 0.009MBtu hr
4924 MBtu $1.70
Cost =   8370.8 $/hr or $16.74/MWh
hr MBtu 11
Wasting Coal Example
Assume a 100W lamp is left on by mistake for 8 hours, and that
the electricity is supplied by the previous coal plant and that
transmission/distribution losses are 20%. How much
irreplaceable coal has he/she wasted?

With 20% losses, a 100W load on for 8 hrs requires

1 kWh of energy. With 35% gen. efficiency this requires
1 kWh 1 MWh 1 MBtu 1 lb
    1.09 lb
0.35 1000 kWh 0.29 MWh 0.009MBtu

12
Incremental Cost Example

For a two generator system assume

C1 ( PG1 )  1000 20 PG1  0.01PG21 $ / hr
C2 ( PG 2 )  400 15 PG 2  0.03PG22 $ / hr
Then
dC1 ( PG1 )
IC1 ( PG1 )   20  0.02 PG1 $/MWh
dPG1
dC2 ( PG 2 )
IC2 ( PG 2 )   15  0.06 PG 2 $/MWh
dPG 2

13
Incremental Cost Example, cont'd

If PG1  250 MW and PG2  150 MW Then

C1 (250)  1000 20  250  0.01  2502  $ 6625/hr
C2 (150)  400 15  150  0.03  1502  $6025/hr
Then
IC1 (250)  20  0.02  250  $ 25/MWh
IC2 (150)  15  0.06  150  $ 24/MWh

14
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
m
Minimize CT   Ci ( PGi )
i 1
Such that
m
Initially we'll
 PGi  PD  PLosses ignore generator
i=1 limits and the
losses
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Unconstrained Minimization

 This is a minimization problem with a single

equality constraint
 For an unconstrained minimization a necessary (but
not sufficient) condition for a minimum is the
gradient of the function must be zero, f (x)  0
 The gradient generalizes the first derivative for
multi-variable problems:

 f (x) f (x) f (x) 

f ( x )   , , , 
 1 x  x2 x n 

16
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 f (x) s.t. g(x)  0
We define the Lagrangian L(x,λ )  f (x)  λ T g(x)
Then a necessary condition for a minimum is the
L x (x,λ )  0 and L λ (x,λ )  0
17
Economic Dispatch Lagrangian

For the economic dispatch we have a minimization

constrained with a single equality constraint
m m
L(PG ,  )   Ci ( PGi )   ( PD   PGi ) (no losses)
i 1 i 1
The necessary conditions for a minimum are
L(PG ,  ) dCi ( PGi )
    0 (for i  1 to m)
PGi dPGi
m
PD   PGi  0
i 1

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Economic Dispatch Example
What is economic dispatch for a two generator
system PD  PG1  PG 2  500 MW and
C1 ( PG1 )  1000 20 PG1  0.01PG21 $ / hr
C2 ( PG 2 )  400 15 PG 2  0.03PG22 $ / hr
Using the Largrange multiplier method we know
dC1 ( PG1 )
  20  0.02 PG1   0
dPG1
dC2 ( PG 2 )
  15  0.06 PG 2   0
dPG 2
500  PG1  PG 2  0
19
Economic Dispatch Example, cont’d
We therefore need to solve three linear equations
20  0.02 PG1   0
15  0.06 PG 2   0
500  PG1  PG 2  0
0.02 0 1  PG1   20 
 0 0.06 1  PG 2    15 
    
 1 1      500 
 PG1   312.5 MW 
 P    187.5 MW 
 G2   
    26.2 $/MWh  20
Lambda-Iteration Solution Method

 The direct solution only works well if the

incremental cost curves are linear and no generators
are at their limits
 A more general method is known as the lambda-
iteration
– the method requires that there be a unique mapping
between a value of lambda and each generator’s MW
output
– the method then starts with values of lambda below and
above the optimal value, and then iteratively brackets the
optimal value
21
Lambda-Iteration Algorithm

Pick  L and  H such that

m m
 Gi )  PD  0
P (  L
 Gi )  PD  0
P (  H

i=1 i=1

While  H   L   Do

 M  ( H   L ) / 2
m
If  Gi
P (  M
)  PD  0 Then  H
  M

i=1

Else  L   M
End While
22
Lambda-Iteration: Graphical View

In the graph shown below for each value of lambda

there is a unique PGi for each generator. This
relationship is the PGi() function.

23
Lambda-Iteration Example

Consider a three generator system with

IC1 ( PG1 )  15  0.02 PG1   $/MWh
IC2 ( PG 2 )  20  0.01PG 2  $/MWh
IC3 ( PG 3 )  18  0.025 PG 3  $/MWh
and with constraint PG1  PG 2  PG 3  1000 MW
Rewriting as a function of  , PGi ( ), we have
  15   20
PG1 ( )  PG2 ( ) 
0.02 0.01
  18
PG3 ( ) 
0.025
24
Lambda-Iteration Example, cont’d
m
Pick  L so  Gi )  1000  0 and
P (  L

i=1
m
 Gi )  1000  0
P (  H

i=1
m
Try  L
 20 then  PGi (20)  1000 
i 1
  15   20   18
   1000  670 MW
0.02 0.01 0.025
m
Try  H  30 then  PGi (30)  1000  1230 MW
i 1
25
Lambda-Iteration Example, cont’d

Pick convergence tolerance   0.05 $/MWh

Then iterate since  H   L  0.05

 M  ( H   L ) / 2  25
m
Then since  Gi
P (25)  1000  280 we set  H
 25
i 1
Since 25  20  0.05
 M  (25  20) / 2  22.5
m
 Gi
P (22.5)  1000  195 we set  L
 22.5
i 1 26
Lambda-Iteration Example, cont’d

Continue iterating until  H   L  0.05

*
The solution value of  ,  , is 23.53 $/MWh
Once  * is known we can calculate the PGi
23.53  15
PG1 (23.5)   426 MW
0.02
23.53  20
PG2 (23.5)   353 MW
0.01
23.53  18
PG3 (23.5)   221 MW
0.025
27
Lambda-Iteration Solution Method

 The direct solution only works well if the

incremental cost curves are linear and no generators
are at their limits
 A more general method is known as the lambda-
iteration
– the method requires that there be a unique mapping
between a value of lambda and each generator’s MW
output
– the method then starts with values of lambda below and
above the optimal value, and then iteratively brackets the
optimal value
28
Generator MW Limits

 Generators have limits on the minimum and

maximum amount of power they can produce
 Often times the minimum limit is not zero. This
represents a limit on the generator’s operation with
the desired fuel type
 Because of varying system economics usually many
generators in a system are operated at their
maximum MW limits.

29
Lambda-Iteration with Gen Limits

In the lambda-iteration method the limits are taken

into account when calculating PGi ( ) :
if PGi ( )  PGi ,max then PGi ( )  PGi ,max
if PGi ( )  PGi ,min then PGi ( )  PGi ,min

30
 Lambda-Iteration Gen Limit Example
In the previous three generator example assume
the same cost characteristics but also with limits
0  PG1  300 MW 100  PG2  500 MW
200  PG3  600 MW
With limits we get
m
 PGi (20)  1000  PG1 (20)  PG 2 (20)  PG 3 (20)  1000
i 1
 250  100  200  450 MW (compared to -670MW)
m
 PGi (30)  1000  300  500  480  1000  280 MW
i 1 31
Lambda-Iteration Limit Example,cont’d
Again we continue iterating until the convergence
condition is satisfied. With limits the final solution
of  , is 24.43 $/MWh (compared to 23.53 $/MWh
without limits). The presence of limits will always
cause  to either increase or remain the same.
Final solution is
PG1 (24.43)  300 MW
PG2 (24.43)  443 MW
PG3 (24.43)  257 MW

32
Back of Envelope Values

 Often times incremental costs can be approximated by a

constant value:
– $/MWhr = fuelcost * heatrate + variable O&M
– Typical heatrate for a coal plant is 10, modern combustion turbine
is 10, combined cycle plant is 7 to 8, older combustion turbine 15.
– Fuel costs ($/MBtu) are quite variable, with current values around
1.5 for coal, 4 for natural gas, 0.5 for nuclear, probably 10 for
fuel oil.
– Hydro, solar and wind costs tend to be quite low, but for this
sources the fuel is free but limited

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