The Electric Power Industry - Structural, Economic, and Regulatory Background

What exactly is meant by a generation plant's "no-load" fuel requirement? How does it differ from a power plant's start-up fuel requirements?

"No load" fuel refers to that portion of the fuel that is being continually used merely to spin the multi-ton turbine—a feat which itself involves "doing work" and, therefore, uses up energy. (Continuous operating cost) "start-up" time of the generator is the lead time needed to warm-up and prepare the generation facility to be "synchronized to the grid" so that it can inject electricity into the grid.

When a power system is centrally dispatched on a traditional command-and-control basis, what is meant by the "merit order" of generation dispatch? In broad terms, in what order should the system operator dispatch generation in order to minimize the short-run cost of the electricity being delivered to customers at any moment?

"merit order" : going from cheap stuff to more expensive stuff :-) As demand ramps up, push up the generator to the least-cost option (of all options available) This "merit order" of dispatch is defined by the short- run marginal costs of operating the various available generation units. As consumer demand increases, the system operator chooses to satisfy this marginal increase in demand by producing a corresponding increase in power in the lowest-cost manner available. Likewise, as demand decreases later in the day, the system operator chooses to back of on the most expensive-to-produce unit of power that needs to be reduced to meet the decrement in customer demand.

What is the essential defining characteristic of a "thermal" power plant? What important kind of gas-fired power plant is not categorized as a "thermal" power plant?

"thermal" generation that proceeds by producing high-pressure steam that spins a turbine to drive an electricity generator. These "thermal plants" (or "steam plants") include coal-fired, gas-fired (but not gas turbines), nuclear, and cogeneration plants (which are usually fueled by natural gas but may be powered by other fuels).

To operate a system reliably, a control area operator must have access to certain "ancillary services". There are about a half dozen such services, but the most important are: (1) spinning reserves, (2) automatic generation control, (3) ramping capability, and (4) blackstart capability. Briefly explain what each of these ancillary services involves

(1) spinning reserves: 7% of spinning reserves in the system to prevent it from crashing (2) automatic generation control : certain amount of generation that is contracted with you to give automatic generation control => you control the generation through a central computer, (3) ramping capability: allows you do deal w fragility of the system (?unsure) (4) blackstart capability: how to start system if it goes dark , obtain electricity from the main grid, or from other alternatives : batteries, hydro facilities Bc Can't start powerplant when the grid goes down and crashes

What is a "control area"? What essential function is performed on a regional basis by a "system operator" (sometimes also called a "control area operator" or a "balancing authority")? Why is it necessary that some single entity perform this function?

A control area is a region of the grid surrounded by metering equipment sufficient to monitor the power flows into and out of the control area on a continuous basis. Responsibilities: manage its own region of the grid so as to assure that power injections within the control area are equal to power withdrawals by end-users allow for any planned commerce in power exports and imports out of, or into, the control area The control area operators balance generations and loads within their corresponding region of the grid and coordinates these activities with adjacent control area operators to maintain reliability of the entire Western Connection.

What is the fundamental institutional reason that Texas has continued to operate most of the power system in Texas on a basis that is not routinely interconnected and synchronized to the much larger Eastern or Western Interconnections?

By operating its own grid, Texas avoids being interconnected on a routine basis to a grid crossing state lines. This means that all commerce within the Texas Interconnection is intrastate in nature. This allows most of the electricity activities within Texas to escape regulation by the Federal Energy Regulatory Commission (FERC) because the main purpose of the FERC is to regulate interstate commerce.

What is meant by a generation unit's "capacity factor"? Why would you expect a power plant's capacity factor to vary systematically depending on its technological characteristics? Would you expect to see the actual capacity factors of combustion turbines and coal plants be systematically different? Explain why.

Capacity factor is the ratio between what a generation unit is capable of generating at maximum output versus the unit's actual generation output over a period of time Many generators do not operate at their full capacity all the time. A generator's output may vary based on maintenance issues, weather conditions such as wind and sun availability, fuel costs and/or as instructed by the electric power grid operator. The capacity factor for renewable resources such as a utility-scale wind or solar facility is significantly less than a baseload nuclear, coal or natural gas plant due to the variability of the wind and sun. Baseload power plants, typically using fuel sources such as nuclear, coal, natural gas or hydro, can operate continuously, unlike variable resources like wind and solar facilities.

What are the four major dimensions of economic cost and physical performance that are the most important in distinguishing one generation technology from another (other than the renewable/nonrenewable distinction)?

Capital Costs, Operating Costs, Start-up times, dispatchability Economic characteristics: (1) the capital cost of building the power plant (2) the cost of operating the power plants once it is built. Physical Performance: (3) the required "start-up" time of the generator - lead time needed to warm-up and prepare the generation facility to be "synchronized to the grid" so that it can inject electricity into the grid (4) "Dispatchability" - the ability of the generator to increase or decrease its injections of power into the grid when called upon to do so. Also referred to as "ramping up" / "ramping down"

Focusing only on economics, in selecting between two potential new generation plants to be added to the system, why is it not sufficient to simply look at the total costs of building and operating each of these power plants themselves? What other important economic effect must be considered in selecting the addition that will be economically best for the system?

Cost to build it, cost to operate it, and how does it fit into the existing system Emphasis on the economic impact on the rest of the system

. What determines the short-run marginal cost of producing electricity at any moment in time? How would you generally expect this short-run marginal cost to vary fairly systematically by time of day? What additional consideration determines how the long-run marginal cost of electric generation varies by time of day?

Diurnal fluctuations in the mc of "energy" What is this consumers demand causing me to do on the system rn to meet their demand? Ramp up process but from the cheapest option What if consumer demands even more? Raise it a bit more using a marginally more exp option This goes on until you reach peak demand

What was the nature of the technological battle waged between Edison and Westinghouse in the late 1800s? Which technology prevailed in the long run and what was the main reason why?

Edison was a fan of low current direct current, but it could only be transported about two miles. And would have severe line losses. Westinghouse wanted high voltage alternating power (AC). Westinghouse "won" the "battle of the voltages" in 1896 when he transfered electricity from Niagara Fall to Buffalo.

In what ways, and in what general historical era, did the federal government get directly involved in the electric power industry and remains so today?

Federal Power Act of 1935 Started in 1935, started with price regulation of sales for resale in interstate commerce. Price regulation of transmission service in interstate commerce Public Utility Holding Company Act of 1935 Divestiture of operating companies that were not interconnected with one another Strict SEC regulation of registered holding company finances

. What are the two main reasons for investing capital in any new generation units? In other words, one or both of two basic purposes are typically served by investing capital in new generation; what are these two possible (and not necessarily mutually exclusive) purposes?

For Reliability: Additional generating capacity must be added to meet growing peak demand or operational needs like ramping. For Economics: By investing in more capital-intensive technologies, it may be possible to produce power with lower fuel cost per MWH.

Who was Henry Huntington and what important role did he play in the very earliest development and commercial use of electricity in Southern California? In the long run, what eventually happened to his enterprise?

Formed pacific light and power in 1902. He also formed the Pacific Electric Red Car Lines in 1910 that sprawled Southern California - the "Red Cars" were eventually junked in the 60s but the routes would be the origin of the freeways we know today..

In addition to the federal government, what other governmental institutions are sometimes directly involved in the electric power industry as producers and/or distributors of electricity?

From the beginning, some local municipalities formed their own public power companies in orderto provide their citizens.

What two fossil fuel sources account for the major percentage of electricity produced in the U.S.? Approximately, what percentage of electricity production does each currently account for?

In 2016 Coal: 31% and Gas: 33%

What broad categories of private and public commercial players are there in the U.S. electric power industry?

Investor Owned "Traditional" vertically integrated utilities "Independent" generators Competitive electricity retailers "Independent" transmission companies Solar facility leasers (e.g., SolarCity) Government owned Municipalities Utility "districts" Some state-level agencies Federal Government Rural Electric Cooperatives

All other things being equal, what are the basic economic/operational reasons for having more power plants operating at any one time to serve customer load. What are the operational/economic reasons arguing for operating fewer?

Meeting Peak Demand - This requires the operator assure it has dedicated access to power plants that are actually synchronized to the grid and operating at the time of system peak. To meet this peak reliably, the rule-of-thumb is usually that the operator must have access to 7% more operating capacity than this system peak demand just in case some generation plant suddenly fails. Serving the Minimum Load - The problem is that individual power plants have minimum "turndown" levels at which they can viably operate. They cannot be turned down any lower without shutting them down completely. This would not be a big problem except that, once shut down, they may take many hours to warm back up and synchronize to the grid. Thus, when turning down power production levels over night, the operator must be mindful about preserving enough operating generation to serve the peak demand later that afternoon. Meeting "the Ramp" - On some systems, the most troublesome feature of the load shape is the steepness of "the ramp"—both upward and downward. The ramp refers to the steepness of the load curve—i.e., the megawatt per hour change in customer aggregate customer demand. The challenge in "meeting the ramp" is that individual thermal power plants (i.e., plants that produce electricity by first making steam) have limits on how fast they can increase or decrease their production levels. Cons Greater amounts of no-load fuel constantly being expended Higher (i.e., more constrained) aggregate turndown levels during periods of low load

When an independent entrepreneur is considering building, owning, and operating a new generation plant and selling its output into the wholesale market, what are the most critical economic determinants as to whether this venture will prove to be a profitable venture over its lifetime (likely about 30 years)?

Need to be reasonably sure that it covers the cost of fuel and leaves you with a certain margin where you get a return - then build a PP

Economically speaking, why would a least-cost system operator be concerned about the issue of no-load fuel use on the electric system and what could he/she do to reduce the total amount of no-load fuel being expended?

Over a weekly or monthly time horizon, the system operator must also decide how many, and which, generation units to warm up and synchronize to the grid so they will be available for dispatch going forward in real time. Any work done inside the power plant is simply a "regrettable necessity"—i.e., a cost of conveying the ability to do work to consumers. Thus, whenever a power plant is operating, it is constantly incurring a "fixed" no-load fuel cost. This fixed no-load fuel cost is not a variable cost because it does not vary with the amount of power actually being exported outside the plant and injected into the grid. The no-load fuel cost is simply a fixed cost associated with constantly sustaining the capability of the power plant to convey useful power to the grid.

Briefly explain in reasonably precise words and appropriate diagrams (technology screening curves and a load duration curve) why a vertically integrated electric utility will generally find it economically beneficial to install a mixture of so-called baseload, intermediate, and peaking generation facilities to produce electricity for its customers at least cost. (In your answer, be sure to carefully explain how the answer depends critically on the key roles played by: (1) capital-fuel substitution in the production, and (2) the practical inability to economically store much energy.)

Screening curve diagram from powerpoint! (p60) Load duration curve diagram -> the point on the y axis at which the line is vertical on the x axis refers to the base load. The peak load is the highest point on the y axis, and the curved line in the middle represents the intermediate load. Most concise answer is the next slide (p___)

What is the basic important difference between a simple-cycle Combustion Turbine and a Combined-Cycle Combustion Turbine?

Simple-cycle Combustion Turbine - the turbine is spun essentially by an internal combustion engine configured much like a jet engine. More flexible - are quick starting, can be turned down to low production levels, and can be operated modularly to ramp up/down to follow load swings. Combined-Cycle Combustion Turbine - These plants consist of a marriage of gas turbines and conventional steam boilers. Not as flexible - can be turned down to stable levels of on about 40% of full capacity, in which case fuel-efficiency advantage is substantially lower.

What were the three major end uses of electricity in the earliest years of the power industry around 1900?

Street lighting, large industrial motors, electric railways.

What is the basic economic reason for being willing to incur greater fixed costs in constructing a "baseload" generation unit?

The base load on a grid is the minimum level of demand on an electrical grid over a span of time, optimal base load capacity shows up so often it makes sense to use baseload capacity because its expensive to build but cheap to operate. Breakeven point - switch point, the coal plant ("baseload plant") will be cheaper in the long run if you plan to use it a lot . Depends on how much you will be using the plant. When you have time varying demand and you can't store power, so you have to turn off some power plants - you want a mix of generation tech that's a mix of the capital fuel sub. Some Cheap combustion turbines etc..

What institutional innovation did Thomas Edison launch with his Pearl Street Station in New York City in 1882?

The incandescent light bulb

In broad terms, explain how electricity is produced using turbines and electrical induction. Why is it typically transformed to higher voltages for transmission and distribution across the electric network?

The kinetic energy of moving matter spins a turbine which then turns magnets within a field of wires causing electrons to flow across wires in a network to end users who use it to power appliances. Transmission losses can be reduced by transforming the electric power to high voltages, transporting it long distances, and then transforming the power back down to lower voltages for end users.

How many large interconnected networks are there in the contiguous continental (i.e., lower 48 states) United States?

There are three main synchronous interconnected grids in continental US: Western Interconnection, Eastern Interconnection, Texas Interconnection.

What is meant by a generation units' "ramping capability"? What is the physical basis for thermal generation power plants having ramping limits?

Thermal power plants have limitations on the speed with which they can ramp up or down. These limitations are caused by the fact that ramping up or ramping down places thermal stresses on the equipment because boiler temperatures are either being increased or decreased to increase or reduce steam pressure A power plant contains many interconnected pipes and cylinders that expand and contract at different rates as they are warmed up or cooled down. To avoid damage to the physical equipment, the plant operator must be mindful not to ramp up or ramp down the plant at too fast a rate.

What are the two most economically important broad categories of inputs (i.e., factors of production) used in the production of electricity? Explain, in broad terms, how the ability to substitute these factors in the production of electricity interacts with the imperative of continuously meeting time-varying consumer demand to cause it to be the case that it is usually best (i.e., least costly) to have a variety of different generation technologies installed on an electricity system to serve demand?

These two broad dimensions of electricity consumption will tend to (somewhat) independently drive the two major factors of production used in producing electricity: capital (for power) and fuel (for energy).

Why are electric networks interconnected? What are the various benefits of electric network interconnection?

They are interconnected power input needs to equal power output at all times. Lower costs Access to lower cost sources of power (electricity trading) Ability to achieve the economies of scale of larger individual power plants Coordination of maintenance over a wider area Economies in serving diversified demands ⇒ systems don't all peak at the same time Better reliability Economies achieved by sharing reserves Mutual reliability support

Briefly explain the relationships between "watts" and "volts". Why is it beneficial to transform electricity to higher voltages before transmitting it long distances? What happens if this is not done?

Watts = Volts * Amps Watt is the amount of power exerted when doing a joule of work per second Amps refer to the size of the army of electrons flowing past a point in the circuit Volt refers to how energized each member of that army is Transmission losses can be reduced by transforming the electric power to high voltages, transporting it long distances, and then transforming the power back down to lower voltages for end users.

What is meant by an individual power plant's "heat rate" curve? In general, indicate how the heat rate curve of a "thermal" generation unit is usually shaped by drawing one and pointing out its several important economic features.

a term commonly used in power stations to indicate the power plant efficiency The short run economics of a thermal power plant is determined by its heat rate curve