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Exploiting the Random Nature of Transmission Capacity

Fortnightly Magazine - September 15 1998

SEVERAL YEARS AGO, ENGINEERS AT AMERICAN ELECTRIC Power measured the transfer capability or transmission capacity (in this article we will use the terms interchangeably) between AEP and Commonwealth Edison. Using traditional methods, they found that the winter transmission capacity that year was 3,500 megawatts.

Then they performed a more exhaustive and nonstandard analysis. It showed that during the month of January, transmission capacity actually varied from a low of 1,600 MW (less than half the nominal amount) to a high of 6,000 MW (70 percent higher than nominal).

Why is transmission capacity random? How is the probability structure of transmission capacity computed? Why doesn't anybody use random transmission capacity today? This article will try to answer these questions.

But first, it is important to understand why transmission capacity must be modeled correctly - including its random characteristics. Recognizing electric power transmission system capacity as a random variable will reduce risk and transmission costs and will allow increased use of the transmission system. It will improve both planning decisions and energy contracting in the evolving power markets.

Reducing Risk, Increasing Use

It seems a most ingenious paradox, that modeling transmission capacity as a random variable can reduce risk. After all, isn't risk a function of uncertainty? And isn't a random variable a kind of uncertainty?

Pretending that transmission capacity is a nice, solid, constant, deterministic number doesn't make it so. Facing the uncertainty head on is inherently less risky than assuming away reality.

For example, AEP engineers worried that 28 percent of the time the system transmission capacity was less than what their traditional modeling showed. (See Figure 1, which shows transmission capacity on the horizontal axis and the probability of not reaching a particular value of transmission capacity on the vertical axis.)They were concerned that at any particular moment the system would be called upon to transfer 3,500 MW when it might only be capable of 1,600 MW. If the transmission provider and user assumed that 3,500 MW was available 100 percent of the time, AEP might be exposed to operating problems or expensive penalties for the equivalent of more than one week out of the month.

How might they hedge this risk? The obvious approach is to reduce the reported transmission capacity still further. But doing this - or even using the original 3,500 MW number - is wasteful. Most of the time the transmission capacity is actually greater than 3,500 MW. It is silly to throw this away.

In fact, pretending that transmission capacity was a constant 3,500 MW during just one month could result in trying to use an average of 500 MW of transmission capacity that wasn't there (28 percent of the time), while letting an average of 1,250 MW of available transmission capacity go unused (72 percent of the time)!

If all parties recognized that transmission capacity was not constant, they could design contracts for transmission services with different levels of firmness. Users who could tolerate more frequent interruptions, perhaps through backup contracts elsewhere, would buy less-expensive, interruptible service. Those who didn't have this option could pay