PNNL-26753 Electric Grid Market- Control Structure June 2017 JD Taft Prepared for the U.S. Department of Energy under Contract DE-AC05-76RL01830 PNNL-26753 Electric Grid Market-Control Structure JD Taft1 June 2017 Prepared for the U.S. Department of Energy under Contract DE-AC05-76RL01830 Pacific Northwest National Laboratory Richland, Washington 99352 1 Chief Architect for Electric Grid Transformation, Pacific Northwest National Laboratory. Acknowledgments The author wishes to gratefully acknowledge the many discussions with Paul De Martini and Lorenzo Kristov that contributed greatly to the thinking in this paper. iii Contents Acknowledgments ........................................................................................................................................ iii 1.0 Background ........................................................................................................................................... 1 2.0 Complementary Views of Markets and Controls for Electric Power Systems ..................................... 4 3.0 Control Engineers: How to Think About Electricity Markets .............................................................. 5 4.0 Market Economists: How to Think About Electric Grid Control Systems .......................................... 6 5.0 Market-Control Regimes for Bulk Power Systems .............................................................................. 7 6.0 Electricity Markets and Controls: Essential Relationships ................................................................... 9 6.1 Principle of Market Participant Limits ....................................................................................... 10 6.2 Principle of Control System Endpoint Limits ............................................................................ 11 6.3 Principle of Market Update Rate Limits .................................................................................... 11 6.4 Principle of Control System Update Rate Limits ....................................................................... 11 7.0 Market-Control Regime Structures..................................................................................................... 12 7.1 Basic Grid with Local Control and Regulation/Stabilization ..................................................... 12 7.2 Market Directed Control ............................................................................................................ 13 7.3 Integrated Real Time (RT) Market-Control ............................................................................... 13 7.4 Combined Market Directed and Integrated Real Time Market-Control Loops ......................... 14 7.5 Market Authorized Control ........................................................................................................ 15 7.6 Extended Model ......................................................................................................................... 16 8.0 Essential Differences Between Bulk Electric Systems and Distribution Systems ............................. 18 9.0 Implications for DER Integration ....................................................................................................... 19 10.0 Final Comments .................................................................................................................................. 20 v Figures 1 Simplified View of Bulk System Markets and Controls....................................................................... 8 2 Regions of Support for Electric System Markets and Controls .......................................................... 10 3 Basic Electric System ......................................................................................................................... 12 4 Market Directed Control ..................................................................................................................... 13 5 Integrated Real Time Market-Controls ............................................................................................... 14 6 Combined Market-Directed and Real Time Integrated Market-Control Loops .................................. 15 7 Market Authorized Control ................................................................................................................. 16 8 Extended Market-Control Model ........................................................................................................ 17 vi 1.0 Background Markets and controls are frequently portrayed as being polar opposites, incompatible alternative paradigms, or even competing philosophies for organizing the activities of large complex systems. In the electricity industry in the US prior to the 1990s, the dominant organizational structure was the vertically- integrated utility, characterized by a well-defined geographic and electrical service territory and the ownership or control of most generating facilities,1 a transmission network, local distribution systems and a monopoly over retail electric service for most if not all of the end-users in the territory. A vertically- integrated utility, many of which still exist today, operates mostly on controls with very little scope for markets or market transactions. In the 1990s federal laws and regulations prompted a major restructuring of the industry to enable wholesale competition among generating companies. To that end wholesale markets were created in several regions of the country to facilitate the development of competitive wholesale energy markets and to optimize the use of transmission systems. As such, in the several regions with independent system operators there is a prevailing view that markets are a core component of the 21st century electric system. Markets are seen by some as vastly superior to command-and-control regimes in terms of economic efficiency. Consequently, the role and application of controls have thus been pushed to the edges of many industry discussions except that the operators of grids and generating plants still depend on controls such as plant governors, automatic generation control, and automatic regulation systems to maintain reliable operation. From an architectural perspective, it is clear that markets and controls can and must coexist, even in the most market-oriented electric systems. Only through the complementary roles and functions of markets and controls can complex large-scale systems like the regional interconnected power systems of North America fulfill the societal objectives they are intended to serve. This paper analyzes the markets and control systems for the For the control engineer, electric power grid and show how their interactions are this paper shows how to embodied in a set of combined or integrated “market-control” view markets as tools for structures. It provides a logical way to examine the bounds of each such structure by mapping them into a two-dimensional power system management; space defined by the number of end points or participants and for market economists this the needed update or refresh rate of the essential functions these paper shows how controls structures must perform. For the control engineer, this paper connect markets to physical shows how to view markets as tools for power system management; for market economists this paper shows how systems. controls connect markets to physical systems. These issues are increasingly important as the industry moves toward the integration of high penetration level of DERs. For the purposes of this paper, a control is a means to direct, regulate, or stabilize the behavior of a physical device or system. A control system consists of a device or system to be controlled, a device that directs the desired behavior (“controller”), methods for determining appropriate control signals to elicit the desired behavior from the system (“control algorithms”), and means of communication for sending control signals to the control elements that drive the system and may include sensing and measurement feedback to the controller. The word “control” by itself will refer to the method for determining control signal; the term “controller” will refer the device or devices that compute or otherwise determine control signals. For simple device and system controls, the thing being controlled will always respond (within 1 The 1978 PURPA introduced customer onsite co-generation in the 1980s. 1 physical limits) to the control command or signal and that the control mechanism determines the behavior to be commanded.2 For control of stochastic systems, the situation is more complex. In this case the overall system can be controlled to behave in a statistical sense, even if individual elements are not guaranteed or even known to behave in a particular manner. Consider the example of a nuclear reactor: the overall power output can be controlled even though it is not possible to predict, control, or even know when any specific atom will undergo fission. A well-known example from electric system operation is a demand response virtual resource comprised of thousands of residential air conditioners, whose aggregate behavior can be reasonably well controlled to be acceptable although the behavior of the individual devices is not predictable. For decentralized systems, the control devices, controllers, sensors and actuators, and connections to devices or systems being controlled constitute a control network. Understanding the network concept in relation to the power system network and other grid structures such