Restructured Power systems

RESTRUCTURED POWER SYSTEMS INTRODUCTION The electricity industry over the years is experiencing radical changes significantly in its operational and control aspects and also the energy market structure due to deregulation process and thus evokes new challenging issues in planning and operation of power system. The electrical industry earlier was attributed as a single utility generation, transmission and distribution of electrical energy in its control area, operating as monopoly known as vertical integrated utility. The vertically integrated utility was the only electricity provider in its service territory and had the obligation to supply electricity to all customers in its territory, enjoying the monopoly and exploits the end consumers. In order to prevent the exploitation of the end consumer, the regulating authority, usually government imposes regulations in the business. Thus the power industries earlier were operated as regulated monopoly utilities.

Fig. 1: Traditional Integrated utility

The structure of a conventional vertical integrated utility is shown in the Fig. 1, it is evident that, there involves only two distinct entities a monopoly utility and an end consumer in the conventional vertical utility, with the utility catering power to its consumer. The regulations essentially represent the set of rules or framework that the government impose so as to run the system smoothly and with discipline, without undue advantage to any particular entity at the cost of end consumer. Deregulation is about removing control over the prices with introduction of market players in to the competitive sector. However, this is not correct in a strict sense. ‘Deregulation’ does not mean that the rules won’t exist. The rules will still be there, however, a new framework would be created to operate the power industry.

One major force driving the power industry towards the deregulation was provided by the change in power generation technology. In earlier days, cost effective generation such as Thermal power and Hydro power plants were infested mostly, however with the emerging of new potential power generation technologies such as GAS fired power plants able to generate bulk power, catering the growing demand for electricity in their areas and to sell the generated power

to the existing utility at a competitive price provides

acceleration to the concept of Independent power producers which further supported the concept of Deregulation. Furthermore the deregulation aims at introducing competition at various levels of power industry. The competition is likely to bring down the cost of electricity. The significant benefits of power industry deregulation are: 

Reduction in Electricity price: Under competitive environment the price for the electricity will be less than the monopolist environment. In competitive environment the generation companies will sell the power at a marginal price.

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Choice for the customers: The customers will have choice for its retailer. The retailer will compete not only on the price but also on the functional requirements such as reliability, quality etc.

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Improved service: The retailer will provide better services than what the monopolist provides.

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Innovation: Under deregulated environment, the electric utility will always try to innovate for the betterment of service and in turn save costs and maximize the profit.

DEREGULATION PROCESS The deregulation process starts with unbundling of the originally vertical integrated utility into separate distinct utilities, i.e. separation of transmission activity from the generation activity. Further, distribution can be separated from transmission. Thus, these three mutually exclusive functions are created and there are separate entities or companies that control these functions. The

competition is introduced in the generation activities by allowing private power producers in the context. The transmission sector being a natural monopoly is most unlikely to have competing players in the sector. This is because for natural monopolies like transmission companies, the business becomes profitable only when output is large enough. The deregulated process invokes various distinct entities such as GENCOs, DISCOs, TRANSCO and ISO etc., Thus, many of the ancillary services of vertical integrated utility have a different role to play, however, the common LFC goals for each control area remains same. The primary objectives of automatic generation control in the new environment are: 

To maintain the system frequency at the scheduled nominal value.

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To regulate the power exchange in the interconnectors at the scheduled nominal value.

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To schedule the generation of various GENCOs according to the contracts established with the DISCOs.

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To regulate the voltage at various buses at the scheduled nominal value.

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To maintain the reliable operation of the interconnected power system.

These services are referred as Ancillary services, which are necessary to maintain secured operation of the interconnected power system. Ancillary services are defined as all those activities on the interconnected grid that are necessary to support the transmission of power while maintaining reliable operation and ensuring the required degree of quality and safety. In deregulated power system, these services are coordinated by an Independent system operator, which provides adequate security level for anticipated energy transactions between GENCOs and DISCOs spanning over various control areas, network configurations and for various operating scenarios.

The

independent system operator acquires central coordination role and carries out the important responsibility of providing system reliability and security. It manages system operations such as scheduling the generation, operating the transmission related services. The system operator ensures the required degree

of adequacy and reliability by providing corrective measures for different operating conditions and during disturbance scenarios. KEY COMPONENTS OF DEREGULATED POWER SYSTEM In deregulated power system with unbundling of generation, transmission and distribution invokes various distinct entities such as Generating companies (GENCOs), Transmission companies (TRANSCOs), Distribution companies (DISCOs), Independent system operators (ISO) etc. each operating as a separate entity.

Fig. 2: Structure of deregulated power system

With unbundling of the vertical integrated utility, many of the ancillary services of the vertical integrated utility have a different role to play, however the common LFC goals, i.e. restoration of frequency and the net power interchange to their desired values, scheduling the generation of GENCOs according to the bilateral contracts spanning between the DISCOs and GENCOs of interconnected control areas remains same.

GENERATION COMPANIES (GENCOS) GENCO is an owner operator based power producer having one or more generators that runs and have the capability to accept and act on the instructions of energy dispatch center without delay through AGC control system.

These GENCOs also sell the ancillary services such as regulation;

voltage control and reserve that the system operator needs to maintain the quality and security of the electric supply. A generating company can own a single plant or a portfolio of plants of different technologies. Generating companies that coexist with vertical integrated utilities are sometimes called as independent power producers (IPP). TRANSMISSION COMPANIES (TRANSCO) Transmission companies own transmission assets such as lines, cables, transformers and reactive power compensation devices. They operate this equipment according to the instructions of the independent system operator. A TRANSCO doesn’t own any generating plants but provides the available network to all entities of the system. The independent system operator controls the utilization of the network by the entities and thus maintains the reliability of the network. DISTRIBUTION COMPANIES (DISCOS) Distribution companies own and operate distribution networks. In a traditional environment, they have a monopoly for the sale of electrical energy to all consumers connected to their network. In a fully deregulated environment, the sale of energy to consumers is decoupled from the operation, maintenance and development of the distribution network. The DISCO buys electricity from the GENCOs directly or through spot-markets and supply electricity to the end-user customers. RETAIL ENERGY SERVICE COMPANY (RESCO) Retail Energy Service Company is the retailer of electric power in its area. Many of these utility will be the retail departments of the former vertically

integrated utilities. A RESCO buys power from GENCOs on the wholesale market and resell it to consumers who do not wish, or are not allowed, to participate in the wholesale market. Retailer does not own any power generation, transmission or distribution assets. INDEPENDENT SYSTEM OPERATOR (ISO) The independent system operator has the primary responsibility of maintaining the security of the power system. It is called independent because in a competitive environment, the system must be operated in a manner that does not favor or penalize any one market participant over another. The independent system operator (ISO) owns only the computing and communications assets required to monitor and control the power system. In deregulated environments, generation companies (GENCOs) submit their operating, maintenance plans and constraints to the independent system operator (ISO) including maintenance time windows, available maintenance resources, and generation price offers. Transmission companies (TRANSCOs) also submit their respective maintenance plans and constraints to the system operator. The ISO is responsible for the optimal coordination of maintenance for generation units and transmission lines which would ensure the security and reliability of power systems. CUSTOMERS A customer is an energy consuming entity in the power system. In deregulated power system the small customers buy electrical energy from a retailer and lease a connection to the power system from their local DISCO. The role of these small customers in the electricity market is to choose a retailer for the power purchase. The large customers on the other hand will take an active role in the energy market by buying their electrical energy directly through the market by bidding or directly from GENCOs.

OPERATIONAL ISSUES OF RESTRUCTURED POWER SYSTEM Network congestion is one of the challenging issues of the de-regulated power system. Transmission network provides the path through which transactions are made in a power market. But each transmission network has its own physical and operating limits like line flow limits, bus voltage magnitude limits and more. The power injection and withdrawal configuration should be such that no limit gets violated. If the network is operated beyond these limits, it may, even, result in the entire system blackout. Therefore, any arbitrary set of transactions can’t be organized on the power network. This has given rise to a new problem under the restructured power system environment, referred to as congestion management. There are many ways in which congestion is formally defined but to explain in simple words, when some components in a power network appear to be overloaded due to a trading arrangement, that particular arrangement is said to create congestion on the network. The purpose of congestion management is to make necessary corrections in order to relieve congestion. It can be easily appreciated that under the vertically integrated structure, network congestion, in fact, is not a challenging task. This is because all the resources in the system are under the direct control of the monopolist. Thus, this is the sole responsibility of the monopolist to maintain its transmission network. In deregulated power systems, transmission networks are available for third party access to allow power wheeling. In such an environment, the ancillary services are no longer treated as an integral part of the electric supply. They are unbundled and priced separately and system operators may have to purchase ancillary services from ancillary service providers. Then, there are certain issues like market design and market power which need regulatory intervention. Existence of market power shows the signs of deviation from the prefect competition. In general, market power is referred to as ability of market participants to profitably maintain the market price above

or below the competitive level for a significant period of time. To tackle the situation, an indirect regulatory intervention in the form of market design rules is needed. Thus, as mentioned earlier, deregulation does not mean ceasing to have rules. It is the ‘restructuring’ of the power business framework.