Presented at

1. Operating and Planning the US & China Grids for Reliability and Economic Efficiency to Enable Optimal Use of Smart Grid Presented at International Symposium on Smart Grid and Renewable Generation Impacts on the Power System Taiwan National University, Institute of Applied Mechanics Taipei by Robert Blohm卜若柏 Member North American Electric Reliability Corp. (NERC) Managing Director KEENResources Asia Ltd. http://www.blohm.cnc.net November 18, 2010年11月28日

2. OUTLINE1. How the electric grid is planned and operated determines which Smart Grid investments will be made. Planning and operating models2. Planning models. 3. Operating models4. Challenges in grid configuration and management5. Challenges for Mainland China

3. How the electric grid is planned and operated determines which Smart Grid investments will be made. Planning and operating models are based on: power-flow model. Model of electricity flow on the system in response to changes in system components. models to forecast economic/scheduled usage and contingencies/emergencies. are combined with 2 economic efficiency principles choosing the least-cost (or market-chosen) alternative project economic transfer from the causer of the cost to the bearer of the cost

4. 2. Planning models. Competitive market time horizon: less than 5 years. Two kinds often confused together. • Economic. Of scheduled power. • Based on an economic forecasting model and a targeted, controlled LOLP (loss-of-load probability) • Criticism: • biased toward excess supply • ignores price-rationing • attempts to target an unstated low price not clearly related to LOLP.

5. 2. Planning models. Competitive market time horizon: less than 5 years. Two kinds often confused together. (cont.d) • Reliability. Transmission. Of unscheduled power. • Criticism: usually based on robustness to any contingency (a fault or loss of any element) without regard to probability of occurrence. • Probability must be based on historical data. The US still doesn’t have a complete database • NERC has a generation outage database, whose software was translated by China in the 1980s • DOE has a transmission outage database but no load loss database • Two events could be more probable than a single one

6. 2. Planning models. Competitive market time horizon: less than 5 years. Two kinds often confused together. (cont.d) • Reliability. Transmission. Of unscheduled power. (cont.d) • Used to determine TRM (transmission reliability margin) to subtract from TTC (total transmission capacity) to get ATC (available transmission capacity) • TRM is designed to meet the NERC performance requirement of withstanding • a single uncontrolled contingency, and • a second controlled contingency to prevent an uncontrolled contingency • Reliability is strictly defined as avoidance of uncontrolled outages

7. 3. Operating models • Transmission. • Economic. Rationing of ATC (available transmission capacity) by redispatch when there is congestion. By • out-of-“merit”-order dispatch of generation (SEE NEXT SLIDE), and possibly by • allocation of FTRs (fixed transmission rights) in markets. • Reliability. Based in the US on the IDC (interchange distribution calculator) which is a DC model of the powerflow identifying source and sink and updated every hour (but updatable every minute). • Invocation of TLR (transmission loading relief) to reroute/redispatch power in the event of a contingency. • (Under development) Allocation of unscheduled congestion by ACE Distribution Factors. Allocation of allowable ACE by IDC distribution factors determined by Kirchoff’s law. • Generation. • Economic. By “merit” order of • least cost (“system lambda”) in non-markets, or • least LMP (“locational marginal price”) in markets

9. 3. Operating models (cont.d) • Generation (cont.d) • Frequency control. Dispatch of power generation held as “reliability reserve” • Definition. Balancing of unscheduled supply (generation) and demand (load), measured by closeness to scheduled frequency (60 Hz in US, 50 Hz in China). • Upward deviation • High frequency means insufficient supply • Excessive high frequency means surge in power flow which spreads throughout the system (SEE NEXT SLIDE) • Downward deviation • Low frequency means insufficient load • Excessive low frequency means generator vibration and explosion

11. 3. Operating models (cont.d) • Generation (cont.d) • Frequency control. Dispatch of power generation held as “reliability reserve” (cont.d) • Means. Deployment of “reliability reserve” power generation to manage unscheduled changes. • Instantaneous governor response (within seconds): socialized responsibility because all operating generators are equipped to “respond” to any frequency change in order to maintain frequency. • The most expensive reserve • The most difficult to measure and require • Regulation & AGC (automatic generation control) by more slowly deployable reserve (within ten minutes) that is deployed to free-up the governor response for response to the next frequency change.

15. 3. Operating models (cont.d) • Generation (cont.d) • Frequency control. Dispatch of power generation held as “reliability reserve” (cont.d) • US Measure/standard: • Instantaneous response: • based on a self-measure of responsiveness • included as an obligation in the non-instantaneous response measure • Result: • --Cheaper, non-instantaneous response is being used to meet the • instantaneous response obligation • --frequency response deterioration in North America (SEE NEXT • SLIDES) • --2003 Northeast blackout because the instantaneous response • obligation was not strictly met

16. 3. Operating models (cont.d) • Generation (cont.d) • Frequency control. Dispatch of power generation held as “reliability reserve” (cont.d) • US Measure/standard (cont.d): • Instantaneous response (cont.d): • Result (cont.d): • --Introduction of more wind & solar power is further deteriorating • frequency stability • Add to variability rather than add to system responsiveness • They displace fossil generation that could have provided response capability. • Add to slower acting variability that requires a large amount of slower-acting “regulation” reserve that must in turn be backed by a proportional amount of frequency-responsive reserve for when the regulation reserve runs out. • Newer wind turbines can be programmed to provide inertial response that only slows frequency deterioration, but not governor response which stops and begins reversal of frequency deterioration. • Wind’s capacity utilization factor of 5-30% would require a back-down reserve margin of 17-140% to provide a rapid-response reserve comparable to the 5-7% reserve margin of traditional fossil generators. • --A measure is currently being developed but will take at least 2 • years before implemented

17. Deteriorating Eastern Interconnection Frequency Response Source: J. Ingleson & E. Allen, “Tracking the Eastern Interconnection Frequency Governing Characteristic”, IEEE Power & Energy Society, Minneapolis, July 26, 2010.

20. Source: Robert W. Cummings “Overview Frequency Response Initiative”, North American Electric Reliability Corp. (Princeton, NJ) 2010, slide 13. Slide 30 of http://ewh.ieee.org/cmte/pes/etcc/B_Cummings_Latest_Developments_on_NERC_Standards.pdf

21. Asleep at the Switch. Robbing Peter to Pay Paul. Deadbanding of Governors Worsens the Frequency Volatility/Risk on an Interconnection Deadbanding All the Governors on an Interconnection Fattens the Tails of the Probability Distribution of Frequency Error by at least a 1/2 Standard Deviation Worth of Extra Probability Mass Near Normal Distribution Flat-top Near Normal Distribution stretched by ½ SD of 0.0239 Within the Deadband, Frequency Error is Distributed Uniformly with No Central Tendency 0.0209 0.0179 0.0149 Deadbanding Transfers Central Probability Mass from the Old Distribution to Tail Mass of the New Distribution Deadbanding Transfers Central Probability Mass from the Old Distribution to Tail Mass of the New Distribution Count as a Share of 1 0.0119 0.0089 0.0059 0.0029 -0.0001 Source: Author’s analysis and H.F. Illian & S.L. Niemeyer, “Integrating Variable Renewable Energy Resour-ces into the Smart Grid”, Carnegie Mellon University Transmission Conference, Pittsburgh, March 10, 2009. http://www.ece.cmu.edu/~electricityconference/2009/2009%20CMU%20Smart%20Grids%20Conf%20Disk/Presentations/Day%201/Session%201/P11_H%20Illian_Integrating%20Renewable%20Resources.pdf 0.000 0.050 0.150 0.200 0.250 0.100 -0.100 -0.050 -0.250 -0.200 -0.150 Frequency Error (Hz)

22. ERCOT Governor response is proportional at the dead-band reaching 5% at 3 Hz deviation Governor response “Steps” to the 5% droop curve at the dead-band Step response at the dead band, absolutely do not want. Proportional implementation frominside the 36 mHz dead band, absolutely what we want. It is linear from thea16 mHzdead band to +/-3 Hz (but droop is non-linear: does this matter?). Yes, linear/”proportional” by 2011.2 MW/0.1Hz. Dead-band Do you call this response “continuous but non-linear change inside the dead band? No. It’s “discontinuous”. Dead-band 0.01666 Hz Dead-Band 0.036 Hz Dead-Band 600 MW Steam Turbine 5% Droop Setting

23. ERCOT ±16 mHz deadband MW Response MW Response Responsiveness=Slope=-20 MW/0.1Hz Droop: linear (5%) ±36 mHzdeadband Responsiveness=Slope=-20.112 MW/0.1Hz Droop: geometrically decreasing (to 5% at ±3Hz) 600 -2 DHz -1 DHz 1 DHz 2 DHz 0 -600 -3 DHz 0 DHz 3 DHz

24. 3. Operating models (cont.d) • Generation (cont.d) • Frequency control. Dispatch of power generation held as “reliability reserve” (cont.d) • US Measure/standard: (cont.d) • Non-instantaneous response: CPS1 Control Performance Standard. (SEE EQUATION & GRAPH) • Measures: • --a statistical average over time • --a combination of (“covariance” between) system frequency • deviation and individual deviation. • ----When the system deviates very much, the individual member is • allowed to deviate very little • ----When the system deviates very little, the individual member is • allowed to deviate very much • The deviation limits can be statistically determined (SEE GRAPH) • --by the US standard of a once-in-ten-years probability of a major • blackout event. (Economies have experienced recessions at • approximately the same rate in the past century.) • --by a database of scanned frequency and tie-line error

26. NERC’s Control Performance Standard p CPS1 Approximate Instantaneous : On average over the past year: Probability p + Î MW , or Annual standard : D + F : in same direction as D deviation of F RMS "No inadvertent allowed Î Î ( ) : 2 = + m D F Limit 2 in the direction of ( ) D D m F : F Year's Mean of Frequency error when D F : 1-minute average of " D ³ - F Î Î Frequency error Î + < : B 0 Control area i's bias i D F - + -50 50 ( mHz ) - D F D 10 B F 10 B i i : Control area i's maximum allowed 1-minute average tie-line error (plus response obligation) in direction of the frequency error: Î ö Î æ - = B - D F ÷ T 10 ç i i è D F ø : One-year probability density limit on 1-minute averages of frequency error, adjusted for deviation of the mean from 0

28. 3. Operating models (cont.d) • Generation (cont.d) • Frequency control. Dispatch of power generation held as “reliability reserve” (cont.d) • Deterioration in North American frequency response performance • Specifically • upward drift in frequency to near the control limits (SEE NEXT SLIDE) • persistent imbalance accumulations by system participants • Due to no “price” for unscheduled power • no cost or penalty assessment to the causers of imbalance (users of somebody else’s reliability reserve) • no reward to the remediators of imbalance (holders of reliability reserve). • Result • Cost is socialized in fixed transmission fees paid by consumers • Imbalance increases because it is free power to the entity who produces it or consumes it.

29. in The New York Times, August 20, 2003: 10

30. Hz of

31. Frequency Response Measure for BA i: DMWi/Df. DMWi is response provided by i.

33. Distribution/Decomposition of Frequency Response Performance/Responsibility

34. 4. Challenges in grid configuration and management • Radial versus networked. Active power versus reactive power • A radial grid consists of remote large generation such as coal, hydro, and nuclear • A networked grid is a mix of • remote generation to take advantage of trade, and • local, typically gas-fired generation to provide • “peaking” plants to serve infrequent peak load at low capital cost at a high enough electricity price to pay the capital cost (SEE NEXT SLIDE) • local reliability reserve to deploy to • meet local disturbances/contingencies without • --disturbing the systemwide powerflow by deploying remote reserve • generation, and thereby • --making a local disturbance rapidly spread to collapse a wide area • of the power system and • --adding a second possible contingency (loss of transmission) to a • single contingency (loss of generation accessed by that • transmission) (SEE SLIDE)

35. Electric systems based on marginal-cost pricing use low-capital-cost gas turbines to most efficiently meet peak load. High natural gas prices just lower the “capacity factor” which is how long the plant can operate before the coal plant becomes cheaper. High gas prices just rotate the GT line upward around the pivot point of intersection with the price axis 30 % Peak, short- duration load served by gas turbines Load

37. 4. Challenges in grid configuration and management (cont.d) • Radial versus networked. Active power versus reactive power (cont.d) • A networked grid is a mix of (cont.d) • local, typically gas-fired generation to provide (cont.d) • local reliability reserve to deploy to (cont.d) • provide a source of “reactive” power to prevent reduction of transmission capacity due to the import of “active” power. • --Reactive power supports voltage and is determined by the phase- • shift between alternating voltage and alternating current. It • ----can travel only a short distance (150 km) • ----affects the electrical capacity of transmission lines, and • ----must be provided locally by capacitors, synchronous condensers, • generation or extra unused transmission capacity. • --Active power is scheduled energy. • ----Too much long-distance power flowing from the Midwest to the • Northeast on a grid network not designed for long-distance • power flow was a factor in the US Northeast Blackout of 2003 • ----This fact was expressly omitted in the final DOE blackout report • on the basis that long-term power transactions are economics, • not reliability.

38. 4. Challenges in grid configuration and management (cont.d) • Integrating the natural-gas pipeline network with the electricity grid • A robust open-access natural-gas pipeline grid • stabilizes an electricity grid by providing the natural gas to fire local gas-fired power plants • dramatically reduces coal-mining accidents by enabling the sale and distribution of all coal-bed methane gas before coal mines are dug. • The presence or not of local gas-fired electric power affects the configuration of the electric grid providing remote power • A gas pipeline grid and the electric transmission grid are complements to each other, not competitors of each other

39. 4. Challenges in grid configuration and management (cont.d) • Interconnection or isolation • US transmission interconnections between integrated utilities, and eventually control areas • were originally entirely reliability reserve (begun in the late 1920s), then • became used for economic transactions (after WWII). When the concepts of economics and reliability were separated, an unused portion of capacity was assigned for reliability/contingencies • Advantages & disadvantages of interconnection • Interconnected power systems • benefit from the • economics of long-distance power trade, and • the reliability benefit of frequency support among the interconnected regions, but • suffer from vulnerability that a local disturbance can spread to become a collapse of an entire wide-area system

40. 4. Challenges in grid configuration and management (cont.d) • Interconnection or isolation (cont.d) • Advantages & disadvantages of interconnection (cont.d) • Non interconnected systems • are completely robust to disturbances from neighbors • do not benefit from gains from trade between systems • The world financial and economic system is experiencing this • China’s banking system was • largely immune from the financial crisis because not integrated into the global financial system, but • did not benefit from the previous advantages of financial integration • China’s economy is • affected by the economic recession because integrated into the world trade system, and • threatened by protectionism by other countries to substitute their increased national production/jobs for imports/jobs from China. • DC ties provide • the economic advantages of interconnection, but • not the reliability advantages or disadvantages of interconnection

41. 4. Challenges in grid configuration and management (cont.d) • Congestion management • Transmission congestion is efficiently managed only on an economic basis through market-based • long-term transmission contracts/rights and • spot locational marginal pricing of purchased power • Transmission congestion pricing provides an objective economic basis for eliminating or not the congestion bottleneck by building more transmission or building more generation on the expensive side of the constraint • For an efficient power grid, price-based congestion management applies to railroad transportation, a key means of transporting coal to power plants.

42. 4. Challenges in grid configuration and management (cont.d) • Centralized versus decentralized control • Transmission congestion management is best centralized into a single control-room/area because actions have a systemwide effect on powerflow and locational prices • Frequency control is best decentralized because the control error by a single central control center is greater than the combined errors of multiple control-centers which cancel each other out • This was evident when the ERCOT (Electric Reliability Council of Texas) centralized frequency control into a single control center and frequency performance deteriorated • There is an unfortunate trend in the US to centralize frequency control into ever larger ISOs (Independent System Operators) which operate centralized spot markets for pricing congestion. The 2003 Northeast Blackout originated in the hastily-organized, largest and newest of those, the Midwest ISO.

43. 4. Challenges in grid configuration and management (cont.d) • Adequate reserve generation • “Economic” reserve can be handled by a robust market whose participants use their own market-based planning models • Reliability reserve is driven by a system “requirement” enforceable by a penalty since reliability is a “public good” like clean air. The requirement can be • a direct reserve requirement not directly relatable to • operating performance, and • causation of cost • or a(n operating) performance requirement • whereby the entity decides the level of reserves/risk to bear in order to perform within the targeted performance requirement, and • can be directly related to cost causation.

44. 4. Challenges in grid configuration and management (cont.d) • Market pricing to address the environment • Market pricing of energy • curtails energy consumption when prices are high because demand is too great • increases energy consumption when prices are low because the economy is depressed • is called Demand Response, or Demand-Side Management • Global Warming and renewables have displaced other environmental concerns, such as with hydro and nuclear • The reliability cost of the frequency instability caused by wind and solar • is not being included in their economic cost • needs to be measured and allocated directly to the specific wind and solar generators and paid to the providers of frequency support • instantaneous systemwide governor response cannot be self-provided economically by a wind or solar renewable generator.

45. 4. Challenges in grid configuration and management (cont.d) • Market pricing to address the environment (cont.d) • Global warming and renewables are likely to be ignored if a sustained global recession takes hold. A likely at least 5 % drop in global GDP for at least a year meets the global warming reduction goal of 1 % GDP reduction for the next 5 years!

46. 4. Challenges in grid configuration and management (cont.d) • Smart Grid does not by itself solve the hardest grid configuration & management challenges. Smart Grid • provides uiseful tools like • FACTs devices to route power to avoid congestion • Frequency responsive hot-water heaters that nevertheless cannot provide instantaneous frequency response • Batteries to drain and discharge variation excesses and deficits caused by wind power. • does help solve the challenge of limited US grid expansion • does not address cost causation and allocation for these devices, nor least cost. • should not be used to subsidize and socialize the costs of devices and to override attempts to market price and allocate those costs. For example, • instead of congestion cost being borne by the parties causing it, and • without comparing the cost of the FACTS device with the cost of other remedies, such as increasing transmission capacity or adding generation.

47. 5. Challenges for China • Greater efficiency is needed in the resources sector of the economy, including electric power (SEE NEXT SLIDE) • Greater transparency is needed in the models used to plan and operate the grid, to • enable providers to propose hardware and software solutions and not just respond to requests from central grid management • enable market participants to better forecast, plan and manage risk

48. http://ihome.ust.hk/~socholz/China-productivity-measures-web-22July06.pdfhttp://ihome.ust.hk/~socholz/China-productivity-measures-web-22July06.pdf

49. 5. Challenges for China (cont.d) • End below-cost and below-market price regulation • Below world-commodity-market-cost based pricing, such as for electricity, coal and oil-products, prompts excess Chinese consumption that • pushes world prices higher and only hurts China because China has now become a net coal importer, not just oil importer (SEE NEXT SLIDES) • creates unnecessary environmental problems. • Consequently, China imposes administrative demand reduction measures to compensate for the adverse environmental effect of too-low prices, when the simplest solution is • eliminate the below-market, below-cost pricing • subsidize poor people directly by giving them cash not related to electricity usage. They will consume less electricity and use the cash for something else. • Begin demand-side pricing/bidding in the electric power market, now that world energy prices were lower for a while.

50. China's Coal Imports and Exports, 2002-2007 Source: National Bureau of Statistics http://www.researchinchina.com/report/UploadFiles_8547/200708/20070802151002331.gif