intact. This redundancy raises the cost of the network. Furthermore, flows of electricity through a
meshed network are governed by physical laws
and are difficult to predict. The operation of a
meshed network is, therefore, complex and computationally demanding. Radial networks are a
simple arrangement of links, with single paths
connecting nodes. Radial networks are less resilient, but also less costly and less complex.
The system operator balances supply and
demand on the network at all times. Network
voltage and frequency need to be maintained
within precise limits to prevent damage to
equipment and blackouts. The maintenance of
stable voltage and frequency is known as system
security. While generators and consumers can
trade privately for electricity supplied through
the network, system security benefits everyone
equally. The system operator arranges with
generators and consumers to adjust output or
consumption to stabilise the network.
Transmission and distribution links have finite
capacity, which leads to congestion. Congestion
occurs if demand at a node is greater than the
capacity of the links supplying that node. As
demand is variable, it is usually not efficient to
invest in sufficient capacity to meet peak demand
at all times. The efficient level of capacity is
lower, which gives rise to a degree of congestion.
The system operator manages this congestion by
balancing generation output and consumer
demand across the network.
The system operator typically balances in one
of two ways. Under a central dispatch system, the
system operator observes potential generation
and consumption on the network and optimises
the pattern of generation and consumption within
the network constraints. Under a bilateral trading
system, the system operator observes contracted
generation and consumption on the network and
identifies areas of network congestion. The system operator then curtails some generators
causing the congestion and arranges for alternative generators on less congested lines to provide
the missing generation.
(1) Balancing the electricity system
A simple example of balancing an electricity
system under network constraints is shown in
Fig. 26. In this example, a system operator balances a system of two cities interconnected with
a capacity-constrained transmission line. The
numbers in green, blue and purple are the inputs
for the system operator’s balancing problem. The
numbers in red are the outputs.
In City A, generators can produce up to 150
megawatts (MW). Generation costs $10 per
megawatt-hour (MWh). Consumers demand
50 MW. In City B, generators have 50 MW
capacity. Generation costs $20/MWh. Consumers demand 90 MW, exceeding the local
generation capacity. Consumer demand in both
cities is constant and does not change with price.
The interconnection between City A and City B
can carry up to 80 MW.
To minimise the total cost of the system, the
system operator first uses the cheaper generation
in City A. Generators in City A serve local
demand (50 MW) and export 80 MW to City B
(in total 130 MW). Because the 80 MW capacity
of the interconnection is fully utilised, the more
expensive generators in City B serve the rest of
City B’s local demand (10 MW). As a result, the
system price equals the cost of the generators in
City B ($20/MWh), and the total cost is $2,800
(140 MW x $20/MWh).
(2) Electricity networks in a liberalised electricity system
The liberalisation of electricity markets has a strong
economic rationale: competition maximises efficiency and increases welfare. For this reason, many
countries have gradually liberalised their electricity
markets, reducing government intervention and
increasing competition. Beginning in 1990 with the
UK, liberalisation spread to Norway, Chile,
Argentina, New Zealand and Australia in 1991, and
began to spread across the USA from California in
1994. The European Commission published
directives in 1996 that encouraged more countries
across Europe to liberalise.
Liberalisation of electricity markets means the
development of competitive markets, with minimal government control over the technologies
and prices in these markets. Competitive markets
operate in wholesale electricity, capacity and the
procurement of balancing services. Historically,
Special Report 1: A Study of China’s Energy Supply Revolution
85
meshed network are governed by physical laws
and are difficult to predict. The operation of a
meshed network is, therefore, complex and computationally demanding. Radial networks are a
simple arrangement of links, with single paths
connecting nodes. Radial networks are less resilient, but also less costly and less complex.
The system operator balances supply and
demand on the network at all times. Network
voltage and frequency need to be maintained
within precise limits to prevent damage to
equipment and blackouts. The maintenance of
stable voltage and frequency is known as system
security. While generators and consumers can
trade privately for electricity supplied through
the network, system security benefits everyone
equally. The system operator arranges with
generators and consumers to adjust output or
consumption to stabilise the network.
Transmission and distribution links have finite
capacity, which leads to congestion. Congestion
occurs if demand at a node is greater than the
capacity of the links supplying that node. As
demand is variable, it is usually not efficient to
invest in sufficient capacity to meet peak demand
at all times. The efficient level of capacity is
lower, which gives rise to a degree of congestion.
The system operator manages this congestion by
balancing generation output and consumer
demand across the network.
The system operator typically balances in one
of two ways. Under a central dispatch system, the
system operator observes potential generation
and consumption on the network and optimises
the pattern of generation and consumption within
the network constraints. Under a bilateral trading
system, the system operator observes contracted
generation and consumption on the network and
identifies areas of network congestion. The system operator then curtails some generators
causing the congestion and arranges for alternative generators on less congested lines to provide
the missing generation.
(1) Balancing the electricity system
A simple example of balancing an electricity
system under network constraints is shown in
Fig. 26. In this example, a system operator balances a system of two cities interconnected with
a capacity-constrained transmission line. The
numbers in green, blue and purple are the inputs
for the system operator’s balancing problem. The
numbers in red are the outputs.
In City A, generators can produce up to 150
megawatts (MW). Generation costs $10 per
megawatt-hour (MWh). Consumers demand
50 MW. In City B, generators have 50 MW
capacity. Generation costs $20/MWh. Consumers demand 90 MW, exceeding the local
generation capacity. Consumer demand in both
cities is constant and does not change with price.
The interconnection between City A and City B
can carry up to 80 MW.
To minimise the total cost of the system, the
system operator first uses the cheaper generation
in City A. Generators in City A serve local
demand (50 MW) and export 80 MW to City B
(in total 130 MW). Because the 80 MW capacity
of the interconnection is fully utilised, the more
expensive generators in City B serve the rest of
City B’s local demand (10 MW). As a result, the
system price equals the cost of the generators in
City B ($20/MWh), and the total cost is $2,800
(140 MW x $20/MWh).
(2) Electricity networks in a liberalised electricity system
The liberalisation of electricity markets has a strong
economic rationale: competition maximises efficiency and increases welfare. For this reason, many
countries have gradually liberalised their electricity
markets, reducing government intervention and
increasing competition. Beginning in 1990 with the
UK, liberalisation spread to Norway, Chile,
Argentina, New Zealand and Australia in 1991, and
began to spread across the USA from California in
1994. The European Commission published
directives in 1996 that encouraged more countries
across Europe to liberalise.
Liberalisation of electricity markets means the
development of competitive markets, with minimal government control over the technologies
and prices in these markets. Competitive markets
operate in wholesale electricity, capacity and the
procurement of balancing services. Historically,
Special Report 1: A Study of China’s Energy Supply Revolution
85