Tariff Rates (Power Generation): How to Determine Tariff Rates for the Sale of Electricity


Problem Statement

A number of power stations are committed to meeting the following electricity load demands over a day:[16]

12

[a.m.]

to

6

a.m.

15,000 megawatts

6

a.m.

to

9

a.m.

30,000 megawatts

9

a.m.

to

3

p.m.

25,000 megawatts

3

p.m.

to

6

p.m.

40,000 megawatts

6

p.m.

to

12

[a.m.]

27,000 megawatts

There are three types of generating unit available: 12 of type 1, 10 of type 2, and five of type 3. Each generator has to work between a minimum and a maximum level. There is an hourly cost of running each generator at minimum level. In addition there is an extra hourly cost for each megawatt at which a unit is operated above minimum level. To start up a generator also involves a cost. All this information is given in Table 15.1 (with costs in £).

In addition to meeting the estimated load demands there must be sufficient generators working at any time to make it possible to meet an increase in load of up to 15%. This increase would have to be accomplished by adjusting the output of generators already operating within their permitted limits.

Which generators should be working in which periods of the day to minimize total cost?

What is the marginal cost of production of electricity in each period of the day; i.e. what tariffs should be charged?

What would be the saving of lowering the 15% reserve output guarantee; i.e. what does this security of supply guarantee cost?

Table 15.1:  

       

Cost per hour

 
 

Minimum

Maximum

Cost per hour

per megawatt

[Start-up]

 

level

level

at minimum

above minimum

cost

Type 1

850 MW

2000 MW

1000

2

2000

Type 2

1250 MW

1750 MW

2600

1.30

1000

Type 3

1500 MW

4000 MW

3000

3

500




[16] Reproduced with permission of John Wiley & Sons Ltd. (Williams 1999, p. 247).