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
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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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