Homepage for EE/Econ 458 (Tesfatsion)

Economic Systems for
Electric Power Planning

Last Updated: 14 April 2024 Latest Course Offering: Fall 2011 Meeting Time: MWF 11-11:50am Meeting Place: Marston 205 Syllabus for Dr. Tesfatsion's Class Days EE 458 Course Structure (McCalley) Team Instructors: Dr. Jim McCalley Department of Electrical & Computer Engineering ISU, Ames, IA 50011 Office: Coover Hall, Room 1115 Office Tel: 515-294-4844 Secretary Tel: 515-294-8057 https://home.eng.iastate.edu/~JDM/ jdm AT iastate.edu Dr. Leigh Tesfatsion Department of Economics ISU, Ames, Iowa 50011-1070 Office: Heady Hall, Room 375 https://www2.econ.iastate.edu/tesfatsi/ tesfatsi AT iastate.edu

Instructor Office Hours: Dr. McCalley: Wed 1-2, Coover 1115,       and by appointment Dr. Tesfatsion: Wed 3:10-5pm, Heady Hall 375,       and by appointment

Grading Assistant 1: Ms. Qihui Qi (EE) qihui AT iastate.edu

Grading Assistant 2: Mr. Dong-Jin Pyo (Economics) Office/Tel: Heady Hall 280B, 4-5888 Office Hours: Monday 3:10-5,       and by appointment djpyo AT iastate.edu

Syllabus for Dr. Tesfatsion's Class Days EE 458 Course Materials: Latest Version (Dr. McCalley) General Resources on Electricity Restructuring

Course Objectives Topic Outline and Tentative Schedule Structure (grade policy, exam policy, etc.) Disability Statement

Course Objectives

Electric power systems around the world are currently undergoing substantial changes in their structure and rules of operation. This process has come to be referred to as restructuring.

For example, prior to 1990 most electricity in the U.S. was supplied by vertically integrated utilities operating under a regulatory compact whereby they agreed to provide an adequate supply of electricity for all users in return for receiving a fair rate of return on their capacity. In contrast, over 50% of generating capacity in the U.S. is now operating under a centrally administered wholesale power market in which electricity is priced in accordance with the location and timing of its injection into and withdrawal from the transmission grid.

Debates and controversy continue with regard to the exact form that restructured electric power systems should take. At the national level, regulatory agencies (such as the U.S. Federal Energy Regulatory Commission) are in the process of revising the entire regulatory framework within which electric power systems operate, with fiduciary responsibility for protecting against risks to national security. At the regional level, system operators are devising and implementing new rules of operation in an attempt to ensure reliability as well as efficiency and fairness. At the level of participant traders, companies are developing new strategies for the purchase and sale of energy and securement of ancillary services in an attempt to enhance their net earnings while protecting against financial and operational risks.

Some commentators continue to argue that this restructuring process has not produced the intended improvements in system efficiency while at the same time it has complicated efforts to ensure the reliability of system operations and the efforts of traders to protect themselves against financial risks. Given the extraordinary global financial crisis that has recently taken place, it seems inevitable that calls will strengthen for a return to heavier regulation of power systems.

This course will cover topics essential for understanding key issues currently surrounding the restructuring of electric power systems both here in the U.S. and abroad. The specific course goals are to enable each student to:

• characterize existing electric industry structure and market systems;
• solve linear programming and integer programming problems using commercial optimization software packages;
• use the two basic electric energy market computational tools: security constrained optimal power flow and security constrained unit commitment;
• determine electricity and transmission prices, how they affect the transmission expansion of electric power systems;
• be conversant with transmission and resource planning tools and procedures used by today’s industry.

Topic Outline and Tentative Schedule

1. Historical Background and Course Overview (JM/LT)
2. Microeconomic Basics for Power Systems
   1. Modeling of Generator Costs (JM)
   2. Market Demand/Supply Basics (LT)
   3. Theory of the Competitive Firm (LT)
   4. Introduction to Constrained Optimization (LT)
3. Linear Programming and Application to Optimal Power Flow (JM)
4. Integer Programming and Application to Security Constrained Unit Commitment (JM)
5. Operation of Electric Power Markets (LT)
   1. Game Aspects of Power Systems
   2. Organization of Power Markets
   3. Power Market Trading Subject to Transmission Constraints
   4. Real-World Examples: Policy Concerns
6. Financial Risk Management for Power Systems (LT)
   1. Markets, Risks, and Risk-Hedging Contracts
   2. Financial Risk Management: Basic Concepts
   MIDTERM EXAM 1: Monday, September 19th
   (regular class room and time)

   MIDTERM EXAM 2: Wednesday, November 2nd
   (regular class room and time)

   FINAL EXAM SCHEDULE (ISU BULLETIN):
   Tuesday, December 13, 9:45-11:45am (regular classroom)

Course Structure

Credits and Prerequisites

• EE/Econ 458 is co-listed as a 3-credit engineering and economics course. The prerequisites are EE 303 or Econ 301 (or permission of the instructor). Familiarity with the following topics is essential: matrix algebra, calculus, basic optimization concepts.

Required Student Materials:

• Textbook (Bookstore): Daniel Kirschen and Goran Strbac, Fundamentals of Power System Economics, Wiley, 2004
• Other Materials: All required materials posted to course websites or handed out in class.

Class Attendance:

You are strongly encouraged to attend and participate in class, but role will not be called. However, YOU ARE RESPONSIBLE FOR ALL INFORMATION PRESENTED IN CLASS. The websites, instructors, and graders, although available to you, are not responsible for providing you with in-class information if you choose not to attend class.

Take-Home Exercise Assignments (Tesfatsion):

• All take-home exercises assigned by Dr. Tesfatsion will be handed out and/or posted online.

• All take-home exercises assigned by Dr. Tesfatsion are due at the beginning of class on the due date. Assignments handed in after discussion of exercise answers has commenced on the due date will be considered late. Late assignments will not be accepted for formal grading and inclusion in course grades -- no exceptions.

• Some exercises will be individual assignments, and some exercises will involve assigned teams. Exercise teams will be posted on-line for any team exercise assignments.

• You are strongly encouraged to work all assigned problems as preparation for the exams.

Exams:

• There will be TWO MIDTERM EXAMS held during the semester, as well as a COMPREHENSIVE FINAL EXAM.

• The first midterm exam is scheduled for Monday, September 19 in our regular classroom at our regular time. The second midterm exam is scheduled for Wednesday, November 2 in our regular classroom at our regular time. The final exam is scheduled for Tuesday, December 13, 9:45-11:45am, in our regular classroom.

• Please mark these dates down on your calendar now to ensure that you do not inadvertently schedule something else for any of these three exam dates/times.

• The final exam will be a comprehensive closed-book exam covering all required materials from the first day of classes through the final day of classes. These required materials include: (i) in-class discussions; (ii) take-home homeworks; (iii) midterm exams; and (iv) required assigned readings.

• Absence from either a midterm exam or the final exam will result in a grade of zero unless the instructors agree there are verified extenuating circumstances such as a major medical emergency. In the latter case, either the course grade will be determined on the basis of other work completed (if sufficient work has been completed) or the student will be asked to retake the course at a later time. No make-up exams will be scheduled.

Grading:

Your overall course grade will be computed on a pro-rated point basis as follows

• Homework Assignments: 30% of grade
• Two Midterm Exams: 35% of grade
• Final Exam: 35% of grade
• Class attendance and participation will count for extra credit in case of a borderline grade

Letter grades will be determined according to the following guidelines

• 90 and above: A
• 80 to 90: A- / B+ / B
• 70 to 80: B- / C+ / C
• 60 to 70: C- / D+ / D
• 50 to 60: D- / F
• Below 50: F

Communication:

Feel free to contact the instructors during their office hours, class meetings, or through email if you have any questions or concerns. At the start of classes a mailing list will be established for use by all class participants (including the instructors and grading assistants).

Disability Statement:

If you have a disability and require accommodations, please contact the instructor early in the semester so that your learning needs may be appropriately met. You will need to provide documentation of your disability to the Disability Resources (DR) office, located on the main floor of the Student Services Building, Room 1076, 515-294-7220.