Power system expansion planning in Pakistan, in Interim period – i.e. period before open access

Power system expansion planning in Pakistan, in Interim period – i.e. period before open access

Introduction

 Power sector additions in the last five years have been impressive; by 2018 the gap between demand and supply will almost be bridged. This impressive performance has been marred by some missteps, planning has been a weak area and power sector decisions have been taken without needed analysis and due process.

Pakistan’s power sector structure moved from a vertically integrated utility to a single buyer model. Induction of private sector necessitated that the decision making process needed to involve sensibilities and concerns of various players, use of Long term system expansion optimization software was discontinued. NTDC Planning do undertake a master planning exercise that uses optimization software but this is not a document that figures in the decision making process and is in any case updated after every few years and is therefore not current at all points in time. Power sector generation capacity, decision making is in any case fragmented, WAPDA, NTDC, PPIB, AEBD, Provincial Government Energy Departments, AJ&K and GB Power departments, Ministry of Finance, Planning Commission all play a role in this decision making, which is not closely coordinated. Mainly because in the period of shortages any capacity addition was welcome, now that the capacity gap is being bridged , such decisions are coordinated with CPPA/NTDC who verify that the capacity addition is required  as per the demand forecast and other works in progress.

The decision to liberalize the market was taken years ago and along with that decision it was deemed unnecessary to continue the use of WASP and a central power system expansion planning. It was considered that the private sector will take care of such needs. The privatization got stuck and after a partial incomplete transition the effort was stalled, in this period capacity was procured by both the private sector and the public sector routes. Addition of large hydroelectric structures was dealt by WAPDA, in the public sector. This period saw a very weak planning regime and possibly due to that there were gaps in supply and demand and other errors were also made.

 The system is stated to become a mutli-buyer market in the near future, where investment decisions’ will be taken by a multitude of players using different techniques and software. The present arrangement has not entirely worked in so far as capacity additions are concerned .There , however, has been an error made in adding to much capacity , and also by adding too much base load capacity, both actions have financial implications. The interim period ( before open access )  requires that planning error should not be made, it is proposed that:

1.      .GM Planning NTDC Office should be equipped with WASP ( or some other generation expansion optimization tool) . Capacity building would be required to enable professionals to use WASP. WASP should be used as a verification tool. Decisions like how much base load capacity is to be added in each year should be taken by using WASP. 

2.     Base load Capacity: Thar (and other domestic) coal should have priority when base load capacity is required to be added. RLNG based base load should be considered for diversification purposes  Intermediate and peak load capacity should be : hydropower ; biomass including bagasse( but excluding Bagasse with imported coal)

3.     Foreign exchange needs to be shadow priced to present the cost of making capital investments based on foreign currency.

4.     Institutional arrangements: NTDC Office of GM Planning should be entrusted with planning of the power system, the following is recommended: NTDC Power Planning (NTDCPP) be spin off as an independent authority, with the mandate to carry out; least cost expansion planning; transmission system planning; secondary system planning. In the interim period generation expansion planning  should utilize WASP ( NTDC is familiar with WASP although WASP does have some limitations related to modeling hydroelectric power capacity) ; the system is evolving into a multi buyer system , with this transition centralized power system planning will not be desirable , NTDC Power Planning needs to acquire other software which is utilized for modeling  new generation addition to the system in a mutli buyer market , this service ( and other services) should be provided at cost ; NTDCPP is currently under staffed , positions sanctioned should be filled with immediate effect ; for NTDCPP to act as a planning expert there is need to provide more trained staff to man the generation expansion and transmission expansion planning functions ; have been less than proficient in use of software to carry out secondary system planning, There is need to shift the function of secondary transmission planning to .NTDCPP.   

5.      Induction of small hydroelectric , wind, solar power plants has been stalled due to non availability of transmission interconnection to the grid .All of these including biomass based power generation are indigenous resources of energy and are therefore  contributors towards increase in local content in energy utilization. All of these except biomass are seasonal and are not base load plants. There is reluctance in allowing a free field to solar and wind on grounds of: seasonality of supply; and transmission constraints presently a committee in the MoE decides quantum of wind energy to be added each year. With loaming capacity surplus and NEPRA’s decision to only add wind and solar capacity after competitive bidding all these renewable resources will find scant space in new capacity addition. NTDC needs to use WASP to determine quantum of base load capacity tom be added and also to determine the amount of renewable capacity to be added .Decisions related to what capacity is to be added should be made much in advance and should not be sudden and abrupt , hurting investor confidence . Evacuation of power limitations is one reason cited for the reluctance to add renewable to the system, intermittent nature ( except biomass which is base load) is stated to be the other reason, cost considerations have been addressed mainly by the fast reducing cost of wind and solar power plants. GOPA study commissioned by USAID stated that there are very little system constraints against adding about 2224 MWs renewable capacity. Beyond that major reinforcements to the system will be required. The recommendations of the GOPA study (these are presented below) need to be implemented. Wind potential is located in areas which are either far away from the grid system or are located in areas where surplus power is available, therefore there is need to transmit this power to load centers using primary transmission.

6.     Capacity building and enhancement- NTDC Planning needs that the already approved positions are filled with qualified staff with immediate effect. There is also need to enhance the man power  assigned to NTDC Planning  to take up the additional generation expansion and transmission system expansion planning, along with capacity enhancement a proper detailed and  sustained effort is to be made to build capacity in NTDC planning

Gopa Study: GOPA study presents an analysis of the Pakistan Grid with reference to RE interconnection. The conclusions reached are:

1.     2224 MW wind and solar capacity can be added, with the following grid additions: 25 MVAr capacitors at Bhan Saedabad grid station; 120 MVAr Thyristor controlled reactor (TCR) inductive 200 MVAr MSC Capacitive SVC at Lal Suhanra.; Power system stabilizers (PSS) at two synchronous generators at Hub and Jamshoro. ; And operation of some renewable generators in voltage droop control mode would be beneficial.

2.     In the next phase major additional reinforcements are required these would allow the full 4067 (phase I) of renewable generation to be added but it will also facilitate addition totally 9332 MW (including the 4067 MW capacity discussed earlier) of renewable energy to be added. Improvements required are :  Lal Suhanra region requires reinforcement of 220kV system where a new collection substation is to be installed  and two radial 220kV lines are closed to form a ring  This requires addition of 80 km double circuit 220kV transmission lines , 5 km single circuit 220kV transmission line and 5 additional 220/132 kV power transformers including transformer bays . Reinforcements of the Southern wind corridor requires a new 500kV Jhampir grid station , 90 km 220kV and 500kV transmission lines , a 200MVAr capacitor at Jhampir and 100 MVAr shunt capacitors at Gharo are required .  600MVAr SVC (600MVAr TCR and 300MVAr TSC) at Shikarpur are also required.

3.     Spinning reserve requirements will increase to 1500 MW 500MW more than required by the system in 2018, Thus RE will need an additional 500 MW spinning reserves.

4.     Dispatch will, require to: re-execute wind and OV prediction at 1-4 hours ahead; and shorten the dispatch cycle from 30 min to 15 min.

5.     Wind and PV generators need to have provisions for operation in defined conditions. (Modern VRE plants connect to the grid using electronic power converters or inverters; these can be programmed to allow the way in which a VRE power plant behaves on the power grid to be controlled.) 

6.     Addition of specified levels of RE generation results in a higher NPV as compared to the one without RE capacity.

There is consensus on the fact that addition of up to 30% RE capacity is possible with needed inductive loads and SVCs but higher than that capacity will require new approaches on operating and extending grids. Variability of RE due to weather Introduces uncertainty in generation output .These could affect 70% of solar capacity due to cloud cover and 100% of wind capacity due to still days. This requires base load capacity that can follow load to be interconnected, these are costs. To reduce reserves and spinning reserve costs it is recommended that: there needs to be improvement in weather and wind forecast accuracy; forecasts should be for shorter periods than a day

Conclusions

There is need to put in place a set up for power system generation expansion planning  in the interim period. This is necessary because mistakes that were made in the last five years are not repeated in the future. This will need reintroduction of WASP as an optimization tool, and capacity building and enhancement of planning function currently housed in NTDC. There is need to spin off this unit (along with load flow capability) into a separate national organization.

Power System Expansion Planning in a Liberalized Market

Power System Expansion Planning in a Liberalized Market

The ideas of liberalism, monetarism, deregulation of the economy (including the electric power industry), privatization of state property, freedom from state intervention in trade and other economic activities became quite popular. Thus, it was not by accident that radical and liberal reforms were often accompanied by a considerable relaxation of state control aimed at fast activation of self-regulatory market mechanisms, which were supposed to stimulate economic growth and restructuring of electric power industry  This approach was mainly based on the theoretical conclusions of the classical school of economics that the market balance is achieved owing to the law of demand and supply by means of flexible market pricing under the conditions of perfect competition; prices reflect individual preferences and fluctuations according to the changes in demand and supply; resources are distributed according to the relative price level in the market, and if this level depends on fluctuations in demand and supply, the absolute price level is determined by the amount of money; when the balance is disturbed, the system strives to restore it, that is why any attempts to interfere in the operation of market mechanisms can only aggravate the situation.

The experience of market transformations in electric power industry in most of the countries showed that the initial excessive optimism about the efficiency of purely market forces in the operation and, particularly, expansion of electric power systems proved unjustified. Extremely liberal models of electricity market organization and functioning were set aside and the role of “soft” regulation of these markets by implementing the appropriate government policy was recognized. In essence, the specialists acknowledge now that the most rational method for efficient operation and expansion of electric power systems is a combination of market mechanisms and state regulation. It is worth emphasizing that the determination of such a rational combination is not an easy task and its performance is country-specific because of specific features of economy and electric power industry, conditions of their operation and development.

Moreover, by the late 1990s, the backup generating capacities had started to decrease considerably in many countries, since it turned out to be unprofitable for the generating companies to maintain extra capacities. The electricity market functioning revealed the limitations on the transfer capability of the electric network often at the points, where such limitations had not manifested themselves before (the so- called congestion problem). All this triggered the research into the methods   of   expansion   planning   of   generating   capacities,   and particularly electric networks, on a new market basis.

Under the conditions of liberalized relationships in electric power I industry, the process of analyzing and making decisions on its development involves many participants (stakeholders) that have different interests. These are electric power companies, consumers, investors, and public organizations, federal and regional authorities. Today, the coordination of interests of stakeholders and the formation of mechanisms for ensuring the development process become that present, the methodology of power industry expansion planning is undergoing radical transformation from centralized planning into a new paradigm of the multilateral process for justifying the decisions and creating the mechanisms for their implementation under the conditions of uncertainty, multi-criteria or objectives, and multiplicity of different interests.  This  transformation  is  characteristic  of  all  the countries  experiencing  energy  liberalization  and  deregulation’s main objectives of expansion planning of electric power systems and companies.

The operation of a liberalized power system requires flexible and fast support tools, given the variety of partially autonomous agents that can take decisions that compromise the security of the system.. Generators working in a competitive pool must evaluate a wide range of factors to prepare their bids or asses their trades.. a competitive industry  will  be more focused on its customers, there will be an increased need  for  load  modeling and  control;

A competitive generation market requires three basic functions:

1.    The operation of the market (pool): collecting and processing bids, establishing the balance between generation and demand, computing the system marginal price that will be used to remunerate the energy supplied by the generators, etc.

2.     The  operation  of  the  system:  monitoring  the security of the network , taking into account all the physical constraints that can affect the dispatch, authorizing and applying the generation dispatch provided by the market, as well as the bilateral transactions; arranging the supply of reserve and voltage control services, operating the transmission network. Etc.

3.     The ownership of the transmission network.

In competitive environments, functions 1, 2 and 3 can be carried out by separate entities. The entity in charge of function 2 is usually called the independent system operator. It is responsible for controlling the behavior of the market participants, since they are no longer constrained to follow instructions coming from a centralized control, but may have a certain degree of autonomy. This is especially important if physical contracts are allowed. In this case, the generation dispatch is not  only  a  result  of  a  centralized  market, but generators  can directly  supply  energy  (i.e., can modify their dispatch) through a bilateral arrangement with a consumer or reseller , by-passing the market.

The  independent  system operator  must obviously .assess and  authorize  those contracts,  and  monitor their application . This process has different aspects: The losses caused by each transaction must be estimated and charged to the responsible participants. The impact of each set of transactions in security must be evaluated. If they lead to the violation of security constraints,   the   independent   system operator must re-schedule the transactions. Nevertheless, this rescheduling must be carried out in a non-discriminatory way. For instance, the Californian regulat ion establishes that the dispatch resulting from the pool cannot be given priority over the bilateral transactions. Moreover, the rescheduling should preferably be based on economic signals that would give an estimate of how costly the rescheduling is for each participant.

Transparency   and availability of information are required to obtain an efficient market. A solid structure of  information processing and data communication systems will be require to make sure that all agents have access to the relevant data and can make informed decisions , and the regulation has acknowledged this importance. For instance, the US Federal Energy Regulatory Commission has established the basis for the so called Open Access Same-Time Information System (OASIS) that will be the basis of the US electricity marketplace.

The ability to accurately forecast electricity demand will be increasingly important in a competitive environment, since it will allow the power marketers to negotiate good prices for the energy that they buy.

Another important aspect of modern approaches to the planning of electric power industry, electric power systems and power companies under the conditions of liberalization and deregulation is connected to greatly increasing uncertainty of the expansion planning factors and a growing number of factors forming this uncertainty, as compared to the conditions of the centralized electric power industry. In terms of methodology, there is a short-term uncertainty and a long-term uncertainty. The short-term uncertainty (for instance, fluctuations in electricity prices in prospect as against the forecast, load variations at system nodes as against the forecast, etc.) is represented as random and modeled, for example, by the Monte-Carlo method   The long-term uncertainty is represented by scenarios (for instance, the scenarios of electricity consumption, fuel or equipment prices, etc.)   The fuzzy sets and fuzzy logic are used   In many cases, uncertainty is associated with risk  

Considering    the    uncertainty    of    electric    power    industry development, it is recognized that the ideology of approaches to the expansion planning of electric power systems and companies should be transformed from optimization to forecast and simulation, and from planning to a development strategy   As compared to the previous conditions, the sense and content of mathematical models used for forecasts and simulation expand since the technological models for electric power system expansion planning are supplemented with financial ones [3,42] and gain new functions including assessment of power supply reliability, consideration of demand-side management (DSM), and other capabilities   The use of such powerful means as the geographic information systems is also considered  

Some  authors  do  not  regard  the  generation expansion  planning problem as pressing and assume that the market mechanisms should give the necessary economic signals to the investors to invest in the construction  of  new  power  plants.  However, this  viewpoint  is supported by fewer and fewer researchers, since a deeper analysis and the existing practice show that the market is “shortsighted” and there is a need to foresee the corresponding mechanisms to improve the investment attractiveness of new power plants and reduce the financial risks to investors. To this end, a lot of different approaches are suggested, one of which is the so-called Stratum Electricity Market (SEM). According to this approach, the electricity market structure is considered hierarchically in time, including the spot (hourly), monthly, yearly and long-term markets. The long-term market makes it possible to arrange auctions and attract investment in the construction of power plants   A similar idea was also formulated in   Also, consideration is given to the capacity markets (in addition to electricity markets) that create long-term economic signals for investors for the expansion of power plants  

since every generating company and every independent investor that explore the possibility of investing in the construction of power plants, have their own interests, which should be reconciled taking into account the general system requirements. An independent system operator is considered as the coordinator   and social requirements (the main of which is the reliability of power supply to consumers) – as the system requirements to be checked by the operator. In other cases, the function of the generation expansion coordinator is performed by the state   (which is often identical to the previous case, where the system operator is the state property), and the problem can be viewed as a hierarchical game   When the power plant expansion is regulated, the coordination can be performed by the companies. In this case, the problem is formulated as a cooperative game].

Some authors consider the state generation expansion planning as a means of protection against market risks in a more general case; it is most rational to combine market mechanisms of power plant expansion with the system of state and corporate generation expansion planning, which reduces investment risks. In this case a special fund is established to hedge independent investors against financial risks and construct   power   plants   to   avoid   generating   capacity   shortage

“Holistic” means considering an object as a whole, and not just dealing with particular aspects. In , the electric power systems are comprehensively considered in terms of cost-effectiveness, required reliability, and acceptable environmental impact. The authors of  also consider the social welfare.

The following principles of holistic power system planning are considered:

1.    Comparison of alternative strategies  for  expansion,  using integrated quantitative assessment and maximizing social benefits of expanding the system as a whole;

2.     Use of probabilistic reliability criteria to counterbalance the commonly used deterministic criteria, such as the reliability rule "n-1";

3.     Consideration of the entire expanding system in terms of how it is connected to other electric power systems around it and adjacent systems of different nature at the local, regional, and global levels;

4.     Assessment of costs and benefits from the standpoint of all the stakeholders in terms of their share in the used assets and fair cost and profit sharing among the parties;

5.     Behavior of individual parties in accord with the global goal of the system; in other words, each stakeholder should contribute to the improvement in the efficiency of the entire system, i.e. despite the individual goals of the stakeholders; they should make a contribution to the global goal.

Holistic planning is a new concept which attempts to take into account the characteristics of current split organization structure of the electric power industry, a methodology of gaining the common benefit from optimal allocation of resources with no return to a fully integrated and strictly regulated structure.

The author of  consider two aspects of holistic planning: electric network planning and resource planning. At present, the electric network planning involves great difficulties. The substantial uncertainty about the load forecast, placement of generating capacities, regulatory decisions, construction opportunities, etc. and a large number of stakeholders engaged in expansion planning necessitate the development of new approaches and methods for creating future flexible electric power systems which expand in an efficient manner. The electric network planning is impossible to perform holistically without consideration of resource planning, decisions on electricity consumption, and environmental constraints. The placement of new generating capacities can considerably affect the formation of the electric network. Social welfare implies making decisions optimal from a market viewpoint, under various alternatives, in accordance with the concept "Unity in Diversity”, which is viewed as a way of reconciling individual decisions to the benefit of the society.

The new approach separates the problem of the electric network expansion planning from the problem of generation expansion planning. However, the decision-making about the investment in the electric network expansion should agree with the development of generation and consumption markets to the maximum.

The   holistic   resource   planning   under   the conditions,   where centralized expansion planning does not work and the free market mechanisms turn out to be ineffective made by the stakeholders should agree with social welfare and goals of the society. The mechanisms for implementing such a concept should be developed by the government or by a community of consumers. One of the principles can be based on the inclusion of environmental costs, social needs, etc. in economic and financial criteria, shou On the whole, the new approach called the holistic power system planning, which was considered in [75,76], gives only the main ideas of the new concept of expansion planning under electric power industry restructuring and liberalization. The ideas are aimed at reconciling the individual goals of stakeholders involved in the power system planning and the goals and benefits of the society as a whole.

 It is important to highlight a number of essential aspects which are common for the considered approaches. These aspects are considered both explicitly and implicitly in many studies that solve concrete problems of power system expansion planning.

The first aspect is connected to the systemic character of the studied object whose expansion planning we are dealing with. Electric power systems are objectively viewed as complex integral facilities with a complex, often hierarchical structure and quite strong ties with economic, social, and environmental systems. Such understanding of the systemic character of the object was mainly logical in the past, when the organization structure of electric power systems coincided with their physical and technological structure. It has to be mentioned however that not all specialists realized the systemic character of electric power systems, and therefore their structural complexity and complexity (systemic nature) of their operation and expansion problems. The holistic approach to the expansion planning of a seemingly split electric power system also considers the object of study and the problems of its expansion rather systemically.

Another aspect of the problem consists in the fact that apart from individual interests of the stakeholders in the course of the power system expansion planning, there are also some social interests and social welfare. Certainly, under the prescriptive control of the centralized electric power industry, the individual and local interests were minimal. Individual interests, for instance the interests of private energy companies, were most vividly seen in vertically integrated electric power systems operating in accordance with market principles. In the course of electric power system expansion, individual interests of stakeholders are most tangible in restructured and liberalized electric power industry. Moreover, the interests of different stakeholders contradict each other.

Centralized electric power industry, whose decisions were based on directives, implied that social goals and welfare were evidently prevalent, and the mechanisms for the accomplishment of these social goals were obvious. In the case of vertically integrated electric power companies, which work and develop on the basis of market principles, the social goals are achieved through the corresponding legislative and institutional mechanisms. Characteristically, the operation of competitive market mechanisms and restructured electric power systems, particularly in the holistic approach, also implies the involvement of certain institutions that can regulate the attainment of social goals connected to the electric power system operation and expansion. These institutions can be represented directly by the state or by independent structures, often with state property (communities of consumers, system operator, etc.).

Conclusions

All these considerations lead to the conclusion that in the power system expansion planning it is sensible to rationally combine market mechanisms and state regulation (to a greater extent, “soft” state regulation).