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Measuring the price of security of supply. Andy Philpott The University of Auckland www.esc.auckland.ac.nz/epoc (joint work with Kailin Lee, Golbon Zakeri). From: Electricity Commission Reserve Energy Review, p44, November 2007. From Electricity Commission Presentation, October 2007.

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Measuring the price of security of supply

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## Measuring the price of security of supply

Andy Philpott

The University of Auckland

www.esc.auckland.ac.nz/epoc

(joint work with Kailin Lee, Golbon Zakeri)

### Motivation

• Minzone and energy margin

• How much energy margin to hold for possible dry winters

• Castalia Review of Security

• Electricity Commission Reserve Energy Review (Nov 2007)

• Energy margin depends on generators’ policies

• Computational models for minimum expected cost

• Stage and Larsson

• RESOP (Read)

• SDDP (Pereira) = DOASA (Guan,Philpott)

• How should we compute energy margin?

• How good is DOASA versus Stage and Larsson?

π(100)=0

π(50)

π(m)=T

π(70)

### Test 1 versus SDP

Single reservoir with capacity 100MWh

Three thermal plants each capacity 3MW,

cost \$45, \$50, \$100/MWh

One hydro plant capacity 3 MW

Demand is 8MW peak, 5 MW offpeak

Inflows are 1..8 MWh each with Pr=0.1

Inflow of 0 with Pr 0.2

52 peak hours and 52 offpeak hours

### Test 2: SL versus DOASA (SDDP)

• 70 Historical inflow sequences (1934-2004)

• Use 2005/2006 demand and cogeneration data

• Geothermal capacity offered at zero cost

• Wind capacities set at expected generation and zero cost

• Thermal plant capacities and costs as in DOASA

• 2005/2006 Minzone used (June 2005-May 2006)

• DOASA assumes 10 (stagewise independent) random openings from 1995-2004.

• Initial Marginal Water Value (SL)= 0

HAW

MAN

TPO

demand

N

S

demand

### Lower bound after 200 cuts

Takes about 8 hours on a standard Windows PC to converge

Upper Bound

2005-2006 GWh storage simulated with historical inflow sequences

### Stage and Larsson

SL Policy computed using same parameters

as DOASA

Cuts for SL recorded with slope b and intercept a.

Policy represented in DOASA by adding cuts of the form

ri parameters convert m3 to GWh for reservoir I

SL: 4159 GWh

DOASA: 3741 GWh

### 2000 cost comparison

DOASA Thermal Fuel cost = \$141 M

Stage-Larsson Thermal Fuel cost = \$157 M

### 2001 cost comparison

DOASA Thermal Fuel cost = \$207 M

Stage-Larsson Thermal Fuel cost = \$297 M

### So what?

• Energy margin depends on generators’ policies

• Analysis so far assumes policy is to minimize expected cost via a central planning model: risk aversion might alter the energy margin required.

• What if we assume oligopoly model? Could compute the margin for result of Nash equilibrium policies (e.g. using Dublin)

• If we adopt a central plan model then we must be aware of differences between Stage and Larsson, RESOP, and DOASA. These will give different recommendations for reserve.

• This the first comparison made between DOASA models and heuristics. DOASA is better than I expected.