Reengineering for More Reliable Power Distribution

by Mark B. Lively

Restructuring is sweeping the electricity industry around the world, changing the role engineers must play in achieving a reliable electricity supply. Previously, engineers designed and operated “vertically” integrated systems, where the only interface was the smallish connection associated with the sale of electricity to customers. Sometimes the customer was the end user, and occasionally, a distribution utility. But, except for minor events on the other side of the meter, a single engineering group was responsible for the reliability of the vast majority of the system.

Dealing with New Interfaces

Restructuring has created a jumble of interfaces. Each interface implies that a different group of engineers is responsible for reliability on either side of that interface. These interfaces separate not only engineering responsibility; they also separate financial responsibility. Different people own the wires on each side of the meter. Accordingly, we need a way to coordinate not only the reliability on each side of the meter, but the ownership of the electricity flowing across the meter. This sort of coordination requires an appropriate price, tariff or contract for the flow through the meter.

The flows through the meters on a vertically integrated utility followed predictable load patterns and predictable reliability issues. The jumble of interfaces has created a multitude of non-standard flows across that jumble of interfaces. The non-standard flows have created new reliability issues and new pricing issues, issues that are best handled together. Pricing issues and reliability issues should be linked together, since that will result in improved network reliability.

When developing prices for today's complicated, non-standard flows, engineers need to explain to financial types the physics behind the non-standard flows across these financial interfaces, so that there is appropriate financial compensation. The need for engineers to be educators is especially true in regard to reactive power.

Competition a Reality

Until the passage of the Public Utility Regulatory Practices Act (PURPA) in 1978, electric utilities operated under the myth that they were in a “vertically” integrated industry with no competition. But the competition was really there, just not in conventional forms:

• On an esoteric level, competition exists when two generators are connected in parallel, even when owned by the same economic interest. The two generators compete in economic dispatch to meet the available demand.

• Some factories chose plant sites based on the utility serving the area.

• Some customers, not just distribution utilities, chose to generate their own electricity, e.g., cogeneration. (Yes, cogeneration was used before the passage of PURPA. Cogeneration just operated in a more difficult regulatory environment.)

• Competition also existed in real time, in that neighboring utilities would buy and sell electricity to each other.

Years ago, economies of scale led to horizontal integration. The resulting configuration prompted the boast that the North American electric system is the largest machine in the world, a machine whose parts compete with each other.

Automation for Simplification

Horizontal sales have occurred since the first interconnection, but the transactions were not automated, except in some power pools such as the Pennsylvania New Jersey-Maryland integrated power pool and the New England Power Pool, or within holding companies such as American Electric Power, Southern Companies, and MiddleSouth Utilities (now Entergy Corporation.) Instead, each transaction was custom tailored. PURPA also allowed industrial cogeneration to hook to the utilities and encouraged construction of new generation not owned by the utility, dramatically increasing the number of interfaces. Restructuring has further complicated the number and types of interfaces.

Today's complicated interfaces have power going both ways, as is possible horizontally between two vertically integrated utilities. Historically, engineers did not have to worry much about pricing this flow because of the Old Boy Network that seemed to exist among the vertically integrated utilities (“I scratch your back now and you scratch mine later.”) But, increased competition has lessened electric power industry players' willingness to join the Old Boy Network and the spirit of cooperation has faded.

Pricing Power Flows

Payments for this two-way flow of power can be automated, yielding prices that respond to reliability issues, such as the real-time imbalance between supply and demand. Certainly economists support the concept of pricing based on supply and demand, but engineers can analyze the imbalances' effects so that they may be factored into the automated pricing mechanism. The Wide Open Load Following (WOLF) concept is one such pricing plan. ^(1)(2)(3)

Supplying Needed Reactive Power

In many respects, reactive power is the ultimate two-way flow of electricity. Reactive power flows in and out of an interconnection during each cycle. More importantly, any customer can be a consumer or a provider of reactive power, just as any generator can be a provider or a consumer. Indeed, many parts of the electric network can both use or consume reactive power, depending on loading at various times of the day.

The August 2003 blackout raised the national consciousness of the importance of reactive power, indeed of its existence. The absence of real-time pricing of reactive power was a key contributor to the blackout.⁴ As noted in an earlier column in Today’s Engineer, “Merchant generators don’t get paid for [reactive power], so they don’t want to supply it.”⁵ So, the question is: how do we pay merchant generators for reactive power?

What should engineers do? They can evaluate whether a particular reactive flow is good or bad. The terms good or bad indicate whether the flow is pushing the local voltage toward or away from nominal levels. In other words, at the retail level, customers with lagging power factors during low voltage conditions are bad, while customers with leading power factors are good. Conversely, at the retail level, customers with lagging power factors during high voltage conditions are good, while customers with leading power factors are bad.

That a lagging power factor is not always bad and that a leading power factor is not always good was a lesson this author learned 35 years ago during a summer job at Kentucky Power Company (KPC). KPC used load research to support its power factor tariff. The power factor tariff encouraged large industrial consumers to install capacitors which were sometimes “accidentally” left on during low-load conditions, leading to bad reactive power flows. The resulting over-voltage on KPC lines forced KPC to send linemen out to find the offending customer and ask for the offending capacitors to be switched off.

The WOLF approach to pricing begins with quantifying the quality of a public good related to the commodity to be priced. For reactive power, the public good is the local electric potential, or voltage, since reactive power will change the quality of the electric potential. That is, reactive power will increase or decrease local voltage. The concept is demonstrated in Figure 1. The horizontal axis is local voltage. The vertical axis is the rate paid and charged for reactive power. At the intersection, where the voltage is at its nominal value, the price for reactive power is zero.

Commodity Pricing

By pricing unscheduled power flows as commodities, WOLF eliminates the need for such draconian issues as mandatory reliability standards and penalties for non-compliance. India has already started pricing unscheduled power flows as commodities. As a result, India has improved at least one important reliability index, the variance of frequency from its standard value of 50 Hertz, by a factor of ten.⁶

In short, engineers need to be able to explain reliability issues to accountants and regulators in ways that will allow them to implement better mechanisms for pricing unscheduled flows of electricity. Better mechanisms for pricing unscheduled flows of electricity can improve network reliability, as it has in India.

References

1. "Tie Riding Freeloaders — The True Impediment to Transmission Access," by Mark Lively, Public Utilities Fortnightly, 21 December 1989
    
2. "Parallel Path Flow Profiteering — Is It Justification for Ending the Free Lunch on Unscheduled Power Flows?" a presentation by Mark Lively to Mid-Continent Area Power Pool Fall Operating Committee Meeting, Brainerd, Minn., 29-31 August 1990; and, Southeastern Electric Reliability Council Fall Operating Conference, Asheville, N.C., 10-11 October 1990
    
3. “Profit-Enhancing Seam Management: A White Paper on Pricing the Unscheduled Flows of Electricity Across the Seams Between Utilities Using a Geographically Differentiated Auction of Inadvertent Interchange,” Released by Mark Lively, 25 March 2001, www.LivelyUtility.com
    
4. “Power Crisis: Revenue Accounting Needed: An Issue Paper on the U.S. Northeastern Blackout, 14 August 2003,” by Mark Lively, Energy Pulse, www.energypulse.net/centers/article/article_display.cfm?a_id=521, 28 October 2003
    
5. “Electric Power Transmission Reliability Not Keeping Pace with Conservation Efforts,” IEEE-USA Today’s Engineer, February 2005, www.todaysengineer.org/2005/Feb/reliability.asp
    
6. “Sidebar on Reliability Improvement Associated with India Implementing a Formulary Auction for Unscheduled Interchange,” by Mark Lively, www.LivelyUtility.com

Mark B. Lively is a utility economic engineer who engineers economic solutions for utilities, and a member of IEEE-USA's Energy Policy Committee in IEEE-USA. Comments may be submitted to todaysengineer@ieee.org. Opinions expressed are the author's.