Utility supply companies have long been vexed by the issue of matching supply and demand while maintaining grid stability. And, with the increasing use of intermittent renewables to supply the grid, the problem is becoming ever more troublesome. Dr. Jeremy Bloom of ILOG, an IBM company, reveals how Spanish transmission system operator Red Eléctrica de España improved its dispatch performance.

Dr. Jeremy Bloom, ILOG, Spain

The power industry is widely recognized as one of the main actors in efforts to control increasing levels of global carbon emissions. With mounting pressure from global leaders and regulators such as those governing the European Union, evolving and stringent climate change regulations are increasingly putting pressure on power companies to become part of the solution rather than the origin of the problem.


A wind farm in a mountainous area of Galicia, Spain. Source: Gamesa
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With this in mind, many progressive power companies have pledged to commit to the use of, and investment in, renewable energy sources, such as wind, solar and wave, as part of their power generation portfolio. However, this commitment creates a substantial planning and resourcing headache when it comes to procurement, especially if the power companies do not produce the renewable energy themselves. This – coupled with the grid reliability, enterprise IT and market restructuring issues that also pepper the power horizon – means that efficiency and optimization are top of the agenda for power companies.

As with any commercial business, power companies need to ensure that in going green they also maximize the value of their investments, meet their commitments to their customers and succeed. With this in mind, optimization technology has proved to be part of the solution by helping power companies address complex issues.

Optimization in practice

The power industry has long been a major user of optimization solutions, and as processes and procurement become more complex, the industry is likely to continue to rely heavily on this type of technology.

An example of optimization in practice has been demonstrated by Red Eléctrica de España (REE). The Spanish national power system operator decided to increase its IT investment in order to meet its environmental targets – unusual insofar as many enterprises typically try to reduce their carbon footprint by making their IT systems more energy efficient.

REE was created in 1985 and took over the transmission grid and operation of the Spanish power system, establishing transmission as a separate activity from generation and distribution. The company’s international division also manages the power supply systems in non-peninsular Spain, to the Canary and Balearic Islands and the cities of Ceuta and Melilla.

REE does not generate electricity, but has a responsibility to acquire energy at the lowest cost, while also meeting environmental targets, such as those set out in the Kyoto Protocol.


The Oiz wind farm in Spain, has 30 turbines with a total installed power of 25.5 MW along the Bay of Biscay Source: Gamesa
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In mainland Spain, electricity generators compete by way of a national market, with prices set daily. Off the mainland, however, local markets are too small for this approach to work. REE manages the electricity networks through unit commitment, which refers to the process of dispatching available power sources at the lowest possible cost, while also maintaining safe and consistent supplies – arguably one of the most problematic challenges facing the utility industry today.

Additionally, REE has to utilize all available renewable energy before purchasing from other sources. For example, in the Canary Islands, renowned for their strong Atlantic winds, this means ensuring that all the abundant wind energy is dispatched first and foremost. Because the availability of power from renewable sources, especially from wind, varies with the weather, REE has to calculate potential supplies from renewable sources, based on suppliers’ forecasts and also know what other conventional generating capacity will be available, should the renewable sources fall short. It is fair to say therefore that achieving the best unit commitment – and securing a constant supply of power – requires advanced planning.

Predicting dispatch requirements

Calculating unit commitment requires a large number of variables to be considered over time, such as available generation capacity and generator usage costs, as well as customer demand and environmental regulations. This coupled with a planned undersea interconnector between the Balearic Islands and mainland Spain, which will give access to a broader range of electricity generators, compelled REE to source a system that allowed it more flexibility to adapt to its unpredictable market and produce a truly optimal dispatch.

Originally managed using an internally designed interactive mathematical methodology, REE decided to introduce a malleable, but rigorous technology for modelling the unit commitment system, based on optimization software rather than traditional heuristic methods.

Optimization technology is based on applied mathematics and computer science, and is widely used to help business people make better decisions. It can quickly determine how to most effectively allocate resources, automatically balance trade-offs and business constraints, and eliminate the need to manually work out plans and schedules, achieving maximum operational efficiency.

According to Mustafa Pezic, the project director at REE: “The methodology applied until now was interactive, but did not guarantee an optimum solution. There were many difficulties in the smaller systems, and it was hard to find the most viable solution. Thanks to the new methodology, we have resolved this problem. The new tool allows us to simplify all maintenance tasks and any changes to the model, which in our particular case, are very frequent.”

Pezic says that the implementation of an ILOG Optimisation Decision Manager (ODM)-based solution has provided operational advantages to the company’s managers and engineers. He notes: ‘From a user viewpoint, it has brought greater trust in the solution and a significant reduction in the planning time required by users. In parallel with this, from a development and maintenance perspective, there has been a significant reduction in associated costs, as well as in the duration of the processes.’

Using optimization, planners can compare different scenarios, programmes and production costs. They can also enable active user participation during the development phase and interactions during the solution search process. In short, REE’s operations research personnel can now test generation scenarios quickly and easily. From a software development and maintenance point of view, there has been a significant reduction in associated costs.

Maximizing renewable yields

REE’s unit commitment process now includes renewable energy sources. Through the optimization tools, the utility has been able to integrate the highest possible wind energy (17 per cent of total energy) in the system and has also been able to halve the use of noisy generators at night, significantly reducing its noise pollution. REE has also reduced production costs by 1-2 per cent, which translates into savings of €50 000–€100 000 per day. And at the same time, REE has reduced its carbon emissions by 2.5 per cent – which represents approximately 100 000 tonnes of carbon dioxide (CO2) annually.

The optimization approach has allowed REE to balance supply from renewable and conventional energy sources more cohesively. Because weather changes are difficult to predict, REE’s modelling needed to be all the more precise. This is particularly pertinent with the planned expansion of wind farms in the Canary Islands, and is likely to lead to all the islands’ off-peak (night-time) power demand being met by wind energy, and up to 50 per cent of peak demand.

It is currently estimated that in extra-peninsular Spain, renewables supply less than 10 per cent of energy, but by 2012 that will rise to 20 per cent. REE’s mandate is to programme in as much renewable energy as producers can provide, and every time a new wind farm is installed, and that happens at least once or twice a year, REE will need to update its models.

With the utilization of renewable energy set to continue to dominate the 2009 agenda, the power industry will need to continue to take note of and adapt to this rapidly evolving environment. As the REE case study illustrates, optimization solutions allow for both the business and its technicians to make better decisions when faced with a complex set of variables. What is also evident from the REE story is that investment in optimization software can not only help power companies reduce their carbon footprints but also lower production costs, an attractive prospect in today’s turbulent market environment.

Dr. Jeremy Bloom is senior product marketing manager for optimization at ILOG. He has over 25 years’ experience in the power industry, including General Public Utilities and the Electric Power Research Institute.