Utility Horizons - Second Quarter 2013 - (Page 52)

REGULATION de Rigueur... systems on line, thermostats might be returned to their normal level, since the price being paid by the consumer is close to the normal price charged by the utility during non-special times. As loads grow, the capacity of the solar and cogeneration systems will be surpassed, reducing the surplus on the system and creating a deficit. The special tariff increases the price while the deficit increases. At a deficit of 9.88 MW, the special tariff would have a price of $100/MWH, the operating cost of a typical backup generator. Some backup generators have a lower operating cost and will have turned on when the deficit was smaller. Some backup generators have a higher operating cost and will not turn on until the deficit is even larger. As the deficit grows, loads will also respond. The thermostats for refrigerators and freezers might be raised to an even higher temperature. Water heaters might be turned entirely off. Home HVAC systems might operate at a compromised temperature. These dramatic changes in load will reflect the economics of individual consumers, without any communication to the system operator as to the preferences of the consumer for its demand curve. The special tariff just responds to the shortage and pushes the price higher, encouraging drops in consumer demand. Nuances The difference between supply and demand will show up at each load and each generator as the concurrent system frequency. Thus, though the graph in this paper has a horizontal axis denoted in MW, the actual pricing curve would have a horizontal axis denoted in Hertz, or in the deviation from 60 Hertz. To the extent that the system operates with a power surplus for an extended period of time, the $30/MWH set point would be lowered. For instance, hours of operation with a significant solar surplus would push the upper curve down to the lower curve. Since the lower curve is a hyperbolic sine, all prices for periods of surplus would be negative. To the extent that the system operates with a power shortage for an extended period of time, the set point would be increased. Eventually, a system operator would resume control of the generation and could set different prices than those described in the above example. Restoration of system control will generally be associated with connecting the micro-grid to the system grid. The control system will have a price for electricity going into or out of the micro-grid, which will eliminate the need for the above prices. However, sometimes the micro-grid has internal constraints. These internal constraints and line losses mean that the prices within the micro-grid would not be internally uniform. Some locations would have higher prices. Some locations would have lower prices. When the prices at some locations become high enough, those prices can encourage the conventional distributed generators to operate profitably. Conversely, those prices can become so low that cogeneration plants will reduce their output and even solar plants would shut down.2 The form of dynamic pricing described in this paper could allow distributed generation to help keep the lights on when the system is stressed, making distributed generation a profitable endeavor. The dynamic pricing of the distribution grid would reduce the likelihood of the death spiral for the owners of distribution wires. uhQ See “Dynamic Pricing: Using Smart Meters to Solve Electric Vehicles Related Distribution Overloads,” Metering International, Issue 3, 2010. 2 Author Profile Mark Lively is a consulting engineer specializing in the pricing of electricity and natural gas. He has a BS from MIT in Electrical Engineering and an MS in Management from MIT’s Sloan School. He worked for 5 years in New York City for American Electric Power and 15 years in Washington DC, for Ernst & Ernst and its successors. He has been self employed for 21 years. He is best known for inventing the Committed Unit Basis, the economic model subsequently adopted by name by the Texas Public Utilities Commission, which led to the settlement of the litigation involving Houston Lighting & Power and the large industrial concerns that wanted to sell cogenerated electricity under long term contracts. Mark can be reached via email to MbeLively@aol.com 52 • UTILITY HORIZONS • Q2 - 2013 www.UtilityHorizons.com http://www.UtilityHorizons.com

Table of Contents for the Digital Edition of Utility Horizons - Second Quarter 2013

Utility Horizons - Second Quarter 2013
Publisher’s Message
Contents
The Queue
Automation Rising!
Inside Tracks
Focal Point
Automation and Innovation at Epcor Water Services
BLeading Edge: Advanced Technology Perspectives
Consumer Engagement: The Future Goes Mobile
Demand Response: Why the Future Is in the Cloud
Building Paths to Smarter Water Management
Bullet-Proofing Your Scada System Against the Evil-Doers
Education Matters
Standard Bearings
Regulation De Rigueur
On the Horizon
Purviews
Intersections
Eventualities
Thinking It Through With Sparky Flamedrop
Loose Ends

Utility Horizons - Second Quarter 2013

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