POWER GENERATION and DISTRIBUTION

BASICS

Elecric power is generated by many different types of power plants at many different locations.

While public utilities may own a significant portion of the power needs of its customers, a substantial fraction of the power sources are owned by many different entities.

These power plants are electrically connected to common high voltage transmission lines, thereby adding to the power available for distribution by those transmission lines. The power can be added to that of other plants since all of the plants operate at the same voltage and frequency, and since the frequency of each plant is synchronized with all of the others. At the other end of the transmission lines the voltage is reduced and sent into individual local power distribution lines - and then to each consumer.

The amount of power is typically measured at each source, on each major transmission line to be certain it will not be overloaded, at the main distribution points for local communities and at each user - with a meter.

In addition some of the main transmission lines, and all of the local distribution lines are usually owned by the local utility. However, in order to facilitate transmission of power from one region to another, all of the major transmission lines are leased and controlled by the California Independent System Operator (CaISO). This operation includes some sophisticated controls so that transmission line overloading does not occur due to congestion of transmission requirements.

In turn, CaISO charges each utility or major user a fee for this transmission service. Click here to link to their web site and the current day California power usage.

While large quantities of power are thus "wheeled" from the utilities own plants to customer areas not close-by, the CaISO also wheels power that the utilities buy under long term contracts with other sources.

In addition, in order to provide a stable power market with a high degree of variation in its daily and seasonal usage, the CaISO operates what amounts to a "spot" market, by purchasing and reselling power to utilities and CCAs in excess of the power being delivered to them under their own separate contracts.

This spot market power is bought based upon bids made by numerous power generators, using strict bidding rules, and is sold based upon rates that are periodically fixed based upon the CAISO purchase and operating expenses. Although it is usual for suppliers to have long term contracts to optionally provide this power, it is really spot market power in that the market, and the use of any one source of power, is decided daily based upon the Day Forward prediction of the power required and the lowest bidders for this amount of power.

Since electricity cannot be stored, except in very small quantities - such as batteries for electric cars, it must be generated immediately when it is needed.

Power demands generally fall into three generalized circumstances, base load (that minimum load which is needed 24/7/365 and which typically occurs at night), peak load (the daily and/or seasonal load that is much larger than the base load - and typically occurs in late summer afternoons due to air conditioning loads), and back-up for both planned shutdowns and emergencies.

Accordingly, the CAISO has strict rules requiring all power suppliers who connect to the grid to be capable of providing back-up in addition to their normal peak supply capability even though this means that they are required to build and maintain capacity on line that is not being fully used. Various categories are involved, including a spinning reserve, which is ready and comes on line automatically as the current load increases above the base load, and to cover emergency failures, and a non-spinning reserve that can be started up and be used in the case of planned outages.

CAISO also has rules which recognize transmission system capacity limitations and related contract terms to require both the BACK-UP capability and MUST RUN terms to require that back-up facilities provide power during an emergency.

While it ma;y be convenient to think of the price of electricity based upon supplier bids it is important to view the bid offerings from the perspective of the producer. Although a producer may be willing to sell power at a reduced price during a period of surplus, no new power plants will be built unless prospective producers believe that they can obtain a unit price and a quantity of sales that will cover all of their costs, plus a modest profit.

All producers have similar costs, 1. Amortization of the capital costs, 2. Any fuel costs, 3. The costs of operation and maintenance of their facilities and 4. Profit.

Further, producers will have income to cover these costs only to the extent that they can sell their power.

This leads to the fact that the power use throughout the day, and seasonally, varies considerably as shown in the following ISO graph for November 24, 2010.

This shows that the baseload power is 21,500 MW compared to a peak usage of 31,000 MW showing that the BaseLoaded sources were only operating at full capacity only 69% or the time. Further, their average Capacity Factor, calculated by dividing the cumulative BaseLoad power of 515,000 MW (21,000 MW x 24) by the total 622,000 MW delivered, was 83%. Thus, the price necessary for full cost recovery is not just the cost of Base Load power, but is all of the costs divided by the income from the energy sold.

The same logic is true for both conventional and Solar Photo-Voltaic power systems except that solar systems can produce and sell power only when the sun is shining. Accordingly, although there is no fuel cost, producers using this source must set their price to fully recover their capital and operating costs during the limited period when they are selling power. (Click here to see more than you ever wanted to know about how the amount of solar power generation varies throughout the day - and the time of day when peak power is required.) Simple Thermal Solar systems have the same limitation unless they incorporate an added expensive heat storage system to continue to operate into the evening.

There can be an advantage however in using a mixed source system, with solar systems providing peak power during the day and conventional sources providing the base-load and balance of power not provided by solar. This is commonly called Power Shaping - matching the power sourc to the user requirements.

An obvious limit to this advantage is that no power producer is going to build new production capacity unless it is going to be used. This amount of power is limited to the demand growth, plus a nominal amount for retirement of old facilities. Any amount in excess of this would force reduced usage of existing production facilities - reducing their sales and requiring a compensating increase in the unit price from these sources to retain full cost recovery. However, addition of solar at just equal to the rate of system demand growth would not reduce production from existing units, and could decrease their unit prices since they would have a larger utilization at the increased demand level.

Note that the above discussions apply to any utility that already has existing production sources, or lower cost long term contracts commiting them to buy from other existing sources. PG&E fits this case. However, the new Marin Energy Authority does not own any facilities and only has a five year contract for a flexible amount of power purchase. Thus, they will have an inherent temporary advantage to more rapicly add solar power over PG&E who has no incentive to add any renewable power any faster than their total system growth rate. Further, the transfer of users from PG&E to MEA will further diminish PG&E growth rate - and further diminish any economic incentive to PG&E for rapid addition of solar enery. Of course, in a few years when MEA is well estabilished, MEA will be in the same problem - perhaps leaving an opening for yet another round of new supply systems - to be named MEA-2?

This discussion also points up the fact that the cost of power is not constant but varies throughout the day depending upon the mix of power sources used - leading to the probable future setting of rates based upon Time Of Day usage. Variable rates are also likely to be used for those who install solar panels and produce more power during the day than they use so that their meter runs backwards.

MARIN ENERGY AUTHORITY OPTIONS

They currently contract for power and have it wheeled to various PG&E local distribution centers for a small grid operation fee.

They currently have under consideration two additional sources:

A Feed In Tarrif where they would pay individual small roof top type sources for any surplus they generate, and

They are developing a Request For Proposals from commercial entities for larger (up to 5 MW) sources within the state.

Their current draft RFP would allow them to purchase the above commercial entity sources or they could also simply construct their own power and have it similarly wheeled.

They could also construct their own local power and make local arrangements with PG&E for its distribution.

They could simply buy power from the CAISO, based on power projection needs, at the current CAISO price.