MANAGING SHORT-TERM RELIABILITY RELATED RISKS A**Jose R. Arce **Marija D. Ilid AFrancisco F. Garc6s jarce(j)iee.uns j.edu.ar ilic@mit.edu garces@iee.unsj .edu.ar jarce@mit.edu * Instituto de Energia Electrica Universidad National de San Juan San Juan, Argentina Abstract: In this paper we review criteria and methods for shori- term rellabilip assessment and provision underlying current Industty practice~. The basic conclusion is that these approaches do nol meet the quahp of service requested by the regulators on beha~ of the consumers, Reasons for this situation are complex, and result of bolh regtdatoty and technical lunltatlons. In [h/s paper we we stmple examples to t[[astrate the rationaie for this c[amt and ((s lmp[~catlons Particular stress M on the criteria (standards) and tools used by a system operalor. We illustrate on a small examp~e whal one can and cannel expect from spec!>c approaches. In (he later part of this paper ~ve suggest possible changes in the paradigms governing the relationship be fiveen the provider(s) of rellable servtce and lts users Under the new paradigm the re[iabtlt~ responstbll~ttes are clear~ decomposed into reIiablli@ provlslon by suppllers and ~vire companies with veri@able rellabili~-related products seen by the customer. We flwtherrnore conjecture that this framework can only be implemented m a regu[u[o~, setup that nurtures performance mcermves, Ke}words: Short-term reliablli~ assessment; reserve requirement; resen,e allocation: reliability related risks. 1 Introduction The growing pains of the electric energy industry restructuring are becoming quite visible to the general public. These are reflected either through undesired service interruptions ancUorthrough highly volatile wholesale electricity prices [1]. Concerning continuity of service as seen by the customer, we describe major changes in fundamental principles underlying reliable electric energy service as the industry restructures. We suggest in this paper that the service interruptions are to a large extent the result of a significant lack of regulatory incentives for efficient use and reliability improvement of transmission grids. While this is true even in the regujated industry, the situation becomes critical as the evolving electricity markets require the transmission service beyond the conditions for which it was originally designed. The implications are weak relations between current operating and planning practices and the reliability seen by the customers, as well as inadequate use of potentially powerfully technologies software tools in particular, for implementing a desired level of reliability. Furthermore, we can see that most of the current discussions are related with long-term reliability **Energy Laboratory Massachusetts Institute of Technology Cambridge, MA, USA issues [2], however in the short-term the market alone cannot solve the reliability problem. If there is a shortage, as economic theory shows, the price increases to attract new suppliers [3]. It is true that enhanced prices attract new entrants in the long- run, however, in the electric energy industry there cannot be instantaneous new entrants. The “market” cannot produce additional resources immediately, consequently some load need to be curtailed and/or the prices increase rapidly. The object of the above discussion is to stress the importance of guarding against insufficiencies in the short-time frame. Such situations can creep up on a system without notice. Accordingly, the aim of this paper is to study how a System Operator and an 1S0 can ensure adequacy of supply in the short-term. The paper is organized as follows: in Section 11the practices usually used by System Operators in vertically integrated utiIity structure are presented, in Section 111the current methods implemented by 1S0s in a restructured electric energy industry are analyzed, in Section IV the general underlying principles for providing reliable service under industr)’ unbundling are presented, and finally in Section V the main conclusions are summarized. II Reliability management under vertically integrated utility structure The operating and planning practices of a vertically integrated utility are defined and coordinated on the basis of reliability requirements defined by regulators. These requirements are implemented following “top-down” rules, expecting that meeting these criteria or technical standards will lead to the desired reliability at the customer side. The loss of load probability (LOLP) and the expected value of energy not served (EENS) are some of the typical indices used for measuring system-wide reliability. In this paper we use LOLP to compare the impact of 0-7803-7031-7/01/$10.00 (C) 2001 IEEE 0-7803-7173-9/01/$10.00 © 2001 IEEE 516