Important concepts in an economic analysis,

1. EE 369
Power Systems Engineering
Lecture 1
Introduction
Slides by: Tom Overbye, University of Illinois
With additions by Ross Baldick, University of Texas

2. 2
Simple Power System
• Every large-scale power system has three major
components:
– generation: source of power, ideally with a specified
voltage and frequency
– load or demand: consumes power; ideally with a
constant resistive value
– transmission system: transmits power; ideally as a
perfect conductor
• Additional components include:
– distribution system: local reticulation of power (may be
in place of transmission system in case of microgrid),
– control equipment: coordinate supply with load.

3. 3
Complications
• No ideal voltage sources exist.
• Loads are seldom constant and are typically
not entirely resistive.
• Transmission system has resistance,
inductance, capacitance and flow limitations.
• Simple system has no redundancy so power
system will not work if any component fails.

4. 4
Power
• Power:
– Instantaneous rate of consumption of energy,
– How hard you work!
• Power = voltage x current for dc
• Power Units:
Watts = amps times volts (W)
kW – 1 x 103 Watt
MW – 1 x 106 Watt
GW – 1 x 109 Watt
• Installed U.S. generation capacity is about
1000 GW ( about 3 kW per person)
• Maximum load of Austin about 2500 MW.
• Maximum load of UT campus about 50 MW.

5. 5
Energy
• Energy:
– Integration of power over time,
– Energy is what people really want from a power system,
– How much work you accomplish over time.
• Energy Units:
Joule = 1 watt-second (J)
kWh – kilowatthour (3.6 x 106 J)
Btu – 1055 J; 1 MBtu=0.292 MWh
• U.S. annual electric energy consumption is about 3600
billion kWh (about 13,333 kWh per person, which means
on average we each use 1.5 kW of power continuously).

6. 6
Power System Examples
• Interconnection: can range from quite small, such
as an island, to one covering half the continent:
– there are four major interconnected ac power systems
in North America (five, if you count Alaska), each
operating at 60 Hz ac; 50 Hz is used in some other
countries.
• Airplanes and Spaceships: reduction in weight is
primary consideration; frequency is 400 Hz.
• Ships and submarines.
• Automobiles: dc with 12 volts standard and
higher voltages used in electric vehicles.
• Battery operated portable systems.

7. 7
North America Interconnections

8. 8
Electric Systems in Energy Context
• Class focuses on electric power systems, but we
first need to put the electric system in context of
the total energy delivery system.
• Electricity is used primarily as a means for energy
transportation:
– Use other (“primary”) sources of energy to create
electricity, and electricity is usually converted into
another form of energy when used.
– Electricity is used by transforming into another form
of energy.
• About 40% of US energy is transported in electric
form.

9. Energy sources in US
Total primary energy in 2014:
About 81% Fossil Fuels
Source: EIA Annual Energy Outlook 2014
• About 40% of our total
energy is consumed in the
form of electricity, a
percentage that is gradually
increasing.
• The vast majority of the non-
fossil fuel energy is electric!
• In 2013 we got about 3%
of our electric energy from
wind and < 1% from solar (PV
and solar thermal): increasing
over time, but still small.
Petroleum 36.0%
Natural Gas 25.8%
Coal 18.9%
Nuclear 7.9%
Hydropower 2.7%
Biomass 2.7%
Other Renewables
2.4%
Other 0.4%

10. 37%
30%
19%
7%
1.42%
0.41%0.11% 3.46%1% 1%
Coal
Natural Gas
Nuclear
Hydropower
Biomass
Geothermal
Solar
Wind
Petroleum
Other Gases
Electricity Generation Sources in US 2012
by energy
Coal
Natural gas
Nuclear
Hydroelectric
Wind
Source: EIA 2013

11. 11
Generation Sources in California
2010
Coal 1.0%
Petroleum 0.5%
Natural Gas 52.7%
Other Gases 0.8%
Nuclear 15.8%
Hydroelectric 16.4%
Other Renewables 12.5%

12. 12
Generation Sources in Illinois
2010
Coal 46.5%
Petroleum 0.1%
Natural Gas 2.8%
Other Gases 0.1%
Nuclear 47.8%
Hydroelectric 0.1%
Other Renewables 2.5%

13. 13
Generation Sources in Texas 2010:
(wind grown to around 10% by 2014)
Coal 36.5%
Petroleum 0.2%
Natural Gas 45.4%
Other Gases 0.8%
Nuclear 10.0%
Hydroelectric 0.3%
Other Renewables 6.7%

14. Biomass
0.18%
Coal
36.1%
Gas
5.3%
Gas-CC
35.9%
Hydro
0.07%
Nuclear
11.6%
Other
0.01%
Solar
0.09%
Wind
10.7%
Generation Sources in Texas 2014

15. 15
Energy Economics
• Electric generating technologies involve a
tradeoff between fixed costs (primarily capital
costs to build them) and operating costs:
– Nuclear, wind, and solar high fixed costs, but low
operating costs,
– Natural gas has low fixed costs but relatively high
operating costs (dependent upon fuel prices)
– Coal in between (although recent low natural gas
prices has meant that some coal plants have higher
operating costs than some natural gas).
• Total average costs depend on fixed costs,
operating costs, and capacity factor (ratio of
average power production to capacity).

16. 16
Ball park operating Costs
Nuclear: $10/MWh
Coal: $40/MWh (some coal considerably lower)
Wind: couple $/MWh (maintenance and operating)
Hydro: few $/MWh (maintenance and operating)
Solar: $0/MWh
Natural Gas:
cost in $/MWh is 7 to 20 times fuel cost in $/MBtu;
for example, with $8/MBtu gas, cost is $56/MWh to
$160/MWh; with $5/Mbtu gas, cost is $35/MWh to
$100/MWh.
Note, to get price in cents/kWh take price in $/MWh and
divide by 10.

17. 17
Natural Gas Prices – to 2013

18. Natural Gas Prices
Source: Energy Information Administration,
http://www.eia.gov/todayinenergy/detail.cfm?id=7710

19. Future mix of sources.
• Likely long-term low costs of gas and advent of
greatly increased renewables has already
changed the mix in Texas away from coal and
towards gas and wind:
– Wind already over 10% of electrical energy in Texas,
– Coal traditionally in service throughout year, but
Texas asset owners may only run some coal in
Summer.
• Expect the trend to continue, especially if the US
(eventually) enacts climate change legislation.

20. 20
Goals of Power System Operation
• Supply load (users) with electricity at
– specified voltage (120 ac volts common for
residential),
– specified frequency,
– at minimum cost consistent with operating
constraints, safety, etc.

21. 21
Major Impediments
• Load is constantly changing:
• Electricity is not storable (stored by conversion
to other forms of energy),
• Power system is subject to disturbances, such as
lightning strikes.
• Engineering tradeoffs between reliability and
cost.

22. 22
Example Yearly Electric Load
0
5000
10000
15000
20000
25000
1
518
1035
1552
2069
2586
3103
3620
4137
4654
5171
5688
6205
6722
7239
7756
8273
Hour of Year
MW
Load

23. 23
Course Syllabus (chapters 1 to 7 and 11)
• Introduction and review of complex power, phasors &
three phase (chapter 2),
• Transformers and per-unit system (chapter 3),
• Transmission line parameters (chapter 4),
• Steady state operation of transmission lines (chapter 5),
• Power flow analysis (chapter 6),
• Symmetrical faults (chapter 7),
• Power system controls (chapter 11),
• Economic system operation (chapter 11),
• Optimal power flow (chapter 11),
• Deregulation and restructuring (throughout semester).

24. 24
Brief History of Electric Power
• Early 1880’s – Edison introduced Pearl Street dc
system in Manhattan supplying 59 customers.
• 1884 – Sprague produces practical dc motor.
• 1885 – invention of transformer.
• Mid 1880’s – Westinghouse/Tesla introduce rival
ac system.
• Late 1880’s – Tesla invents ac induction motor.
• 1893 – First 3 phase transmission line operating
at 2.3 kV.

25. 25
History, cont’d
• 1896 – ac lines deliver electricity from hydro
generation at Niagara Falls to Buffalo, 20 miles
away.
• Early 1900’s – Private utilities supply all
customers in area (city); recognized as a
“natural monopoly” (cheapest for one firm to
produce everything because of “economies of
scale”); states step in to begin regulation.
• By 1920’s – Large interstate holding companies
control most electricity systems.

26. 26
History, cont’d
• 1935 – Congress passes Public Utility Holding
Company Act to establish national regulation,
breaking up large interstate utilities (repealed
2005).
• 1935/6 – Rural Electrification Act brought
electricity to rural areas.
• 1930’s – Electric utilities established as vertical
monopolies.

27. 27
Vertical Monopolies
• Within a particular geographic market, the
electric utility had an exclusive franchise
Generation
Transmission
Distribution
Customer Service
In return for this exclusive
franchise, the utility had the
obligation to serve all
existing and future customers
at rates determined jointly
by utility and regulators
It was a “cost plus” business:
Charge to retail customers set by
regulatory authority to be cost of
investment and operations plus
regulated return on investment.

28. 28
Vertical Monopolies
• Within its service territory each utility was the only game in
town.
• Neighboring utilities functioned more as colleagues than
competitors.
• Utilities gradually interconnected their systems so by 1970
transmission lines crisscrossed North America, with voltages
up to 765 kV.
• Economies of scale (bigger is cheaper per unit capacity)
coupled with growth in demand resulted in decreasing
average costs.
• Decreasing average costs together with strongly increasing
demand implied decreasing real prices to end-use
customers over time.

29. 29
History, cont’d -- 1970’s
• 1970’s brought inflation, stagnation of demand
growth, increased fossil-fuel prices, calls for
conservation and growing environmental
concerns.
• Increasing prices replaced decreasing ones.
• In that context, U.S. Congress passed Public
Utilities Regulatory Policies Act (PURPA) in 1978,
which mandated utilities must purchase power
from independent generators located in their
service territory (modified 2005).
• PURPA introduced some competition.

30. 30
History, cont’d – 1990’s & 2000’s
• Major opening of industry to competition occurred as a
result of National Energy Policy Act of 1992.
• This act mandated that utilities provide “nondiscriminatory”
access to the high voltage transmission.
• Goal was to set up true competition in generation.
• Texas followed suit in 1996 and 1999.
• Result over the last few years has been a dramatic
restructuring of electric utility industry (for better or worse!)
• Energy Bill 2005 repealed PUHCA; modified PURPA.

31. 31
Utility Restructuring
• Driven by significant regional variations in
electric rates, reflecting variations in generation
stock and endowments of natural resources.
• Goal of competition is to reduce prices and
increase efficiency:
– (in short term) through the introduction of
competition, and
– (in long term) competition’s incentives for
technological innovation.
• Allow consumers to choose their electricity
supplier.

32. 32
State Variation in Retail Electricity Prices

33. 33
Customer Choice

34. 34
The Result for California in 2000/1
OFF
OFF

35. 35
The California-Enron Effect
Source : http://www.eia.doe.gov/cneaf/electricity/chg_str/regmap.html
RI
AK
electricity
restructuring
delayed
restructuring
no activity
suspended
restructuring
WA
OR
NV
CA
ID
MT
WY
UT
AZ
CO
NM
TX
OK
KS
NE
SD
ND
MN
IA
WI
MO
IL IN OH
KY
TN
MS
LA
AL
GA
FL
SC
NC
W
VA VA
PA
NY
VT ME
MI
NH
MA
CT
NJ
DE
MD
AR
HI
DC

36. 36
August 14th, 2003 Blackout