Positioning for a competitive electric industry with PG&E's Hydro-Thermal Optimization model

Positioning for a competitive electric industry with PG&E's Hydro-Thermal Optimization model

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Article ID: iaor1999214
Country: United States
Volume: 28
Issue: 1
Start Page Number: 53
End Page Number: 74
Publication Date: Jan 1998
Journal: Interfaces
Authors: , , , ,
Keywords: scheduling, production
Abstract:

The Hydro-Thermal Optimization (HTO) system optimizes the weekly electric production schedules of Pacific Gas and Electric Company's diverse resource mix. PG&E developed HTO to reduce operating costs, forecast marginal costs, and position itself for competition. PG&E implemented the system after extensive prototyping and validation and uses HTO daily for unit commitment, hydro scheduling, energy trading, fuel forecasting, resource evaluation, and marginal cost-based pricing. PG&E estimates annual benefits of HTO conservatively at $15 million. On a broader scale, PG&E has used HTO to analyze auction protocols for a deregulated power market and demonstrated that use of HTO-like tools to administer a power auction, as is done in the UK, could result in profit distribution inequities among bidders. HTO thus enabled PG&E to support a profound change in California's restructuring of the electric industry, from the proposed UK-type pool to a decentralized decision-making framework in which bidders optimize their own operations. As a result, California's $20 billion electric-power market will realize increased efficiencies and savings for both taxpayers and consumers.

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