Evaluation of avoided operating cost considering transmission losses

One of the most contentious economic issues regarding nonutility generation (NUG) is the price that a utility has to pay to an IPP for the energy it receives on a short-term basis. When an IPP provides energy to the utility at short notice, existing utility generation schedules are modified or adjusted to accommodate the incoming energy, and such accommodations may not lead to optimum system operation. Thus, there arises a need for the development of a suitable algorithm that can be utilized to incorporate IPP energy in the utility´s short-term scheduling in an optimal manner. An algorithm, illustrated in this paper, can be used for short term rescheduling of the utility generation and also for evaluation of the avoided operating cost (AOC) due to the purchase of IPP energy by the utility. The AOC is the purchase price that utility pays to the IPP in short term in exchange of the energy. The effect of transmission losses is considered in the proposed algorithm for evaluating the AOC. A deterministic criterion is utilized to maintain the reliability of the utility generation system at a desired level. An example system is utilized to illustrate the usefulness of the algorithm. Studies such as those illustrated in the paper can be expected to provide power system planners with a better understanding of the effect of IPP energy inclusion in the short term operation of a utility. Sensitivity studies, similar to those illustrated in the paper, can be utilized to estimate the savings in the running cost incurred by a utility when it buys electrical energy from NUG