Lagrangian Relaxation Unit Commitment (LRUC)

  C  Pg   Su  Sd  u
T n
Minimize t 1 i 1 i i ,t it

(1)

� Pg‫ף‬
n

 " i 1
i ,t
uit Dt t 1,..., T Demand

(2)

�S
n

i 1
i ,t
�S R " t  1,..., T Spinning Reserve

(3)
Pg i ,t 1 - Pg i ,t �Z i " t  1,..., T Ramp-up
(4)
Pg i ,t - Pgi ,t 1 �Wi " t  1,..., T Ramp-down
(5)
Pg min �Pg i ,t �Pg max
i ,t i ,t Unit capacity
(6)

�min  t , xt 1  1 if uit  1
� on

xit  � i
State transition
�max  t , xt 1 - 1 if uit  0
i
off

(7)
�1 if 1 �xi ,t -1 < t on

uit  �
i
Unit status
0 if - 1 �xi ,t -1 > -t
�
off
i

(8)

The Lagragian function is:

 n

  C  Pg   Su  Sd  u   t  Dt -  Pg i ,t uit 
T n T
L= i i ,t it
t 1 i 1 t 1
 i 1 

The UC problem requires to minimize the Lagrange function above subject to the local unit
constraints. The LR procedure solves de UC problem by relaxing or temporarily ignoring the coupling
constraints and solving the problem as if they did not exist. This is done through the dual optimization
procedure. The dual optimization procedure attempts to reach the constrained optimum by maximizing
with respect to the other variables in the problem; that is

q*     Max q  
t

©2004 Guillermo Gutierrez, All Right Reserved

 where q     Min L Pg , u,  
Pgi , t , uit

This is done in two basic steps:

1. Find a value for each t which moves q    toward a larger value.

2. Assuming that the t found in the previous step are now fixed, find the minimum of L by
adjusting the values Pg and u
Assuming that a value has been chosen for all the t and that they are now to be treated as fixed
numbers, we shall minimize the Lagrangian as follows. First we rewrite the Lagrangian as:

  C  Pg   Su  Sd  u  t Dt - t 1 i 1 t Pg i ,t uit
T n T T n
L=
t 1 i 1 i i ,t it  t 1

The second term above is constant and can be dropped. Finally, we write the Lagrange function as:

L=   C  Pg   Su  Sd u
n
i 1
T
t 1 i i ,t it - t Pgi ,t uit 
Here we have achieved our goal of separating the units from one another. The term inside the outer
brackets can be solved separately for each unit, without regard for what is happening on the other
generating units.

min q    
n
i 1
min T
t 1
C  Pg   Su  Sd -  Pg  u
i i ,t t i ,t it 
Subject to u it Pg imin
,t  Pg i ,t  u it Pg imax
,t

Pg i ,t 1 - Pgi ,t �Z i " t  1,..., T

Pg i ,t - Pg i ,t 1 �Wi " t  1,..., T

This can easily solved as a dynamic programming problem in one variable. There are just two

possible states for the unit 0 or 1. When uit  0 , the value of the function to be minimized is trivial; at

the state where uit  1 the function to be minimized is:

min  T
t 1
Ci  Pg i ,t  - t Pg i ,t 

©2004 Guillermo Gutierrez, All Right Reserved

 The minimum of this function is found by taking the first derivative

d
 T
t 1
C  Pg  -  Pg    dC  Pg  - 
i i ,t t i ,t
i i ,t
t 0
dPg i ,t dPg i ,t

dCi  Pg i ,t 
The solution for this equation is  t
dPg i ,t

Example 5F (Wollenberg)
ITERATION 1
Lambda U1 U2 U3 P1 P2 P3 New Load P1 EDC P2 EDC P3 EDC
0.000 0 0 0 0.00 0.00 0.00 170.00 0.00 0.00 0.00
0.000 0 0 0 0.00 0.00 0.00 520.00 0.00 0.00 0.00
0.000 0 0 0 0.00 0.00 0.00 1100.00 0.00 0.00 0.00
0.000 0 0 0 0.00 0.00 0.00 330.00 0.00 0.00 0.00
Maximum deviation 10000.000000

ITERATION 2
Lambda U1 U2 U3 P1 P2 P3 New Load P1 EDC P2 EDC P3 EDC
1.700 0 0 0 0.00 0.00 0.00 170.00 0.00 0.00 0.00
5.200 0 0 0 0.00 0.00 0.00 520.00 0.00 0.00 0.00
11.000 0 1 1 0.00 400.00 200.00 500.00 0.00 0.00 0.00
3.300 0 0 0 0.00 0.00 0.00 330.00 0.00 0.00 0.00
Maximum deviation 1.669871

ITERATION 3
Lambda U1 U2 U3 P1 P2 P3 New Load P1 EDC P2 EDC P3 EDC
3.400 0 0 0 0.00 0.00 0.00 170.00 0.00 0.00 0.00
10.400 0 1 1 0.00 400.00 200.00 -80.00 0.00 320.00 200.00
16.000 1 1 1 600.00 400.00 200.00 -100.00 500.00 400.00 200.00
6.600 0 0 0 0.00 0.00 0.00 330.00 0.00 0.00 0.00
Maximum deviation 0.963367

ITERATION 4
Lambda U1 U2 U3 P1 P2 P3 New Load P1 EDC P2 EDC P3 EDC
5.100 0 0 0 0.00 0.00 0.00 170.00 0.00 0.00 0.00
10.240 0 1 1 0.00 400.00 200.00 -80.00 0.00 320.00 200.00
15.800 1 1 1 600.00 400.00 200.00 -100.00 500.00 400.00 200.00
9.900 0 1 1 0.00 380.00 200.00 -250.00 0.00 130.00 200.00
Maximum deviation 0.504036

ITERATION 5
Lambda U1 U2 U3 P1 P2 P3 New Load P1 EDC P2 EDC P3 EDC
6.800 0 0 0 0.00 0.00 0.00 170.00 0.00 0.00 0.00
10.080 0 1 1 0.00 400.00 200.00 -80.00 0.00 320.00 200.00
15.600 1 1 1 600.00 400.00 200.00 -100.00 500.00 400.00 200.00

©2004 Guillermo Gutierrez, All Right Reserved

 9.400 0 0 1 0.00 0.00 200.00 130.00 0.00 0.00 0.00
Maximum deviation 0.843986

ITERATION 6
Lambda U1 U2 U3 P1 P2 P3 New Load P1 EDC P2 EDC P3 EDC
8.500 0 0 1 0.00 0.00 200.00 -30.00 0.00 0.00 170.00
9.920 0 1 1 0.00 384.00 200.00 -64.00 0.00 320.00 200.00
15.400 1 1 1 600.00 400.00 200.00 -100.00 500.00 400.00 200.00
10.700 0 1 1 0.00 400.00 200.00 -270.00 0.00 130.00 200.00
Maximum deviation 0.037085

Total Cost 20162.750000

The conventional ED, with piecewise linear cost functions can be interpreted as single bidding
auction mechanism. In the case of ED, when it is performed centralized, the operator knows the cost
curves of the generators committed for specific period. In the new environment, GenCos have to make
their own decisions to participate generating power based on maximizing expected profits. GenCos offer
to sell expected amount of power at given price. They break up the total power generation in several
discrete quantities of power at different prices. It is similar to have piecewise linear cost functions.
Mathematically, the classical economic dispatch is formulated as follows:

 
ng
Minimize C T   Ci PGi
i=1
N
S . to P
i=1
Gi  PD  PLOSS

PGimin  PGi  PGimax

where ng = number of generating units under dispatch

N = number of buses in the system
PD = total demand
PGi = generation from generator at bus i
PLOSS = total active power losses in the system
PGimin = lower limit of generator i
max
P Gi = upper limit of generator i

©2004 Guillermo Gutierrez, All Right Reserved

 If GenCos bids are truly based on the cost curves the solution must be the same. However, since
production total costs, fixed and variables, in the competitive industry should be recovered, bids would
be expected to be different, we will discus this subject in next sections.

1.Single Side Auction

The single-side auction has been used for pricing where one of the parties offers to sell (buy) a
resource willing to receive (pay) certain amount of money. In our case we consider that demand is
constant and GENCOs bid for selling their power. Bids are sorted in ascending price.
Mathematically, it can be formulated as an optimization program subject to the same constraints of
the economic dispatch treated a little bit different:

Minimize 
i j
bij Pij

N
S . to P
i=1
Gi  PD  PLOSS

Pijmin  Pbi  Pijmax

where
bi = is the ith bid from the jth GENCO
:
Pij = amount of active power at ith bid from the jth GENCO
min
P Gi ,
max
= lower and upper limit at ith bid from the jth GENCO
P Gi

As an example let’s assume that we have 3 units committed to supply 55 MW. The information of
the piecewise liner curves is presented in Table 1.

Table 1. 2 Segments piecewise linear cost curves

Generator Generation (MW) Cost ($/MWh)
Unit 1 10 10.20
20 14.60
40 19.84
Unit 2 5 10.00
10 12.10
20 14.50
Unit 3 20 13.90
25 15.30
30 17.90

©2004 Guillermo Gutierrez, All Right Reserved

 Same information is submitted in the case of single-side auction and therefore same solution is
obtained. The solution is shown in Table 2.

Table 2. Solution for ECD and Single-side auction

Generator Generation (MW) Profit ($/MWh)
Unit 1 10 102.00
Unit 2 25 271.00
Unit 3 20 278.00

From Table 2, we can observe that the objective of economic dispatch is satisfied by means of single
auction. This will happen during the GenCos bid true values. When demand was considered to be cover
at any time, the marginal generator imposed consumers’ price.
In the new deregulated industry, each consumer bid the price he is willing to pay as well as GenCos
to sell. The auction mechanism used to handle it is the called double-side auction.

2.Double-Side Auction

In the case of double-side auction, sellers and buyers, offer price and quantity. Clearing-house
collects the information and based on the bids an optimization program maximizes the number of
transactions such as this will determine the clearing price.
Consumer behavior affects the extend to which wants are satisfied through its influence on the kinds
of goods produced in the economy, the fashion in which wants are satisfied, and the availability in the
future.
Mathematically, the optimization program can be formulated as:

n m
Maximize  c si Psi -  cbj Pbj
i 1 j 1
n m
S . to P
i 1
si   Pbj  PLOSS
j 1

P min
si  Psi  Psimax
Pbimin  Pbi  Pbimax

where c si = is the price of the ith seller is willing to sell

c bj = is the price of the jth buyer is willing to pay
Psi = accepted amount of active shed-load power bid of the ith seller
Pbj = accepted amount of active reserve power bid of the jth buyer.

©2004 Guillermo Gutierrez, All Right Reserved

 The English auction is a sequential auction where price is pushing up from below. The auction is a
single-sided market with many buyers and one seller. The English auction is theoretically equivalent to
the version of the sealed-bid, uniform-price auction where the price is set at the first rejected offer. The
auction ends when supply equals demand, no information is gained on the supply curve beyond that
point, accounting for the long horizontal line along the final price.
Dutch method tends to generate higher prices. The Dutch method starts with a high price set by the
auctioneer then the prices drops until a buyer signals that he will take the goods.

Bids
26
bid ($/MWh)

GenCo 3
25

GenCo 2
24

23
GenCo 4

22

21

GenCo 1
20

19

18

17
0 6 12 18 24

iterations

Figure 1. GenCos’ Bids

From Figure 1 we can observe how bids for GenCo 4 are up and down. The market price is
imposed by GenCo 3 which is shown in Figure 2.

©2004 Guillermo Gutierrez, All Right Reserved

 Market Price
30

($/MWh)
25

price
20

15

10

0
0 6 12 18 24
iterations

Figure 2. Market Clearing Price

LRUC as Market Clearing Price

The following section discusses the LRUC as auction mechanism. LRUC is seen as an auction
mechanism, English or single-side, to discover the market clearing price in the new deregulated electric
industry. Commonly used in pool models, it stills a global optimization program where the objective
function is to minimize the production cost, subject to operational constraints.
UC in a liquid market would not be necessarily executed to meet the market supply/demand
equilibrium. Instead, the author believes that weekly or monthly forward contracts would fulfill such
task. UC would be running independently by each one of GenCos, self scheduling, in order to find out
their best strategic marketing decision. The traditional plant merit-order base load generation is not any
longer guaranteed as such, because, now it is possible to have gas turbine-based generation stations
supplying base load demand.
LR attains to find market equilibrium by minimizing production cost while GenCos will wish to
maximize their own profits. The first programming problem takes into account the time on/up implicitly
in the formulation, making the problem path dependent. It has been revealed that LR and other
traditional UC approaches do not allow competing generators to maximize their individual profits at the
given price. On the other hand, if GenCos strategy includes turning on costly units they will not just
keep running for high demand scenarios but averaging their production portfolio. Clearly is that such
decision will be unequivocally GenCos’ decision.

©2004 Guillermo Gutierrez, All Right Reserved

 GenCo’s Self-Scheduling:Real Option Approach
Electricity market prices are an important input to the profit-based UC algorithm; they are used to
determine the expected revenue. The optimization program is to maximize the expected profit from the
generation assets, energy and reserve, subject to operational constraints, over a period of time. Then, the
UC program in the real option framework is formulated as the following mixed-integer programming
problem:


max E �
�
n

i
t t i ,t it 
�E  R , C  Pg   - Su  u  - Sd  u  �
� it

(1)

where E  R , Ct  Pgi ,t     P � Si ,t - Ct  Pg i ,t   �
Pg i ,t  P � uit
E S
t t t

subject to the following constraints.

Demand constraint: At every period the residual demand would be estimated, so

©2004 Guillermo Gutierrez, All Right Reserved

 � Pg‫ף‬
n

 " i 1
i ,t
uit Dt t 1,..., T

(2)

Spinning Reserve: reserve residual demand would be estimated at every period, then

�S
n

i 1
i ,t
�S R " t  1,..., T

(3)

Ramp-up constraints: From one time instant to the next the unit cannot increase its output above a
maximum increment; this yields

Pg i ,t 1 - Pg i ,t �Z i " t  1,..., T

(4)

Ramp-down constraints: A unit cannot decrease its output power above a maximum power
decrement. Therefore

Pg i ,t - Pgi ,t 1 �Wi " t  1,..., T

(5)
Unit capacity constrain: Any unit at any time should operate within operational limits, then

Pg min �Pg i ,t �Pg max

i ,t i ,t

(6)

State transition constraints: The length of time the unit has been off or on-line.

�min  t , xt 1  1 if uit  1
� on

xit  � i

�max  t , xt 1 - 1 if uit  0
i
off

(7)

Unit status constraint: The unit can be either on or off, then

©2004 Guillermo Gutierrez, All Right Reserved

 �1 if 1 �xi ,t -1 < t on

uit  �
i

0 if - 1 �xi ,t -1 > -t
�
off
i

(8)

The power production cost function is given by:

�
Ci ,t  Pg i ,t   �
t  ai  bi Pgi,t  di Pgi ,t
�P �F 2
 if Pg i ,t > 0
� 0 if Pg i ,t  0

(9)

where T = Total umber of periods

n = Total number of units
t = Hour index
uit = Binary decision variable indicating whether the unit i at period t is up or down
xit = State variable indicating the length of time that the unit i has been up or down at period
t
p i = Gross expected profit of GenCo i
P t
E
= Energy spot price at period t
P t
S
= Spinning reserve spot price at period t
P t
F
= Fuel spot price at period t
St = Spinning reserve at period t
Dt = Demand required at period t
Zi = Maximum power ramp-up increment of unit i
Wi = Maximum power ramp-down decrement of unit i
Rt = Revenue of unit i at period t
Su  uit  = Start-up costs of unit i at period t
Sd  uit  = Shutdown costs of unit i at period t
Pg i ,t = Active power generation of unit i at period t

Referencias
[1] Allen J. Wood and Bruce F. Wollenberg, Power Generation, Operation and Control, Wiley - Interscience,
Second edition, 1996.
[2] Guillermo Gutiérrez-Alcaraz, Gerald B. Sheblé, GenCo’s Self-Scheduling: Real Option Approach, 36th
North American Power Symposium, University of Idaho, Moscow Idaho, USA, Agosto 2004.
[3] Johnathan Mun, Real Options Analysis: Tools and Techniques for Valuating Strategic Investments and
Decisions, John Wiley & Sons, Inc. 2002.

©2004 Guillermo Gutierrez, All Right Reserved