Chapter 4 Flashcards
direct current
an electric current flowing in one direction only
The first commercial electric power transmission (developed by Thomas Edison in the late nineteenth century) used direct current. DC had a great limitation – namely, that power plants could only send DC electricity about a mile before the electricity began to lose power
Because of the significant advantages of alternating current over direct current in transforming and transmission, electric power distribution is nearly all alternating current today
alternating current
an electric current that reverses its direction many times a second at regular intervals, typically used in power supplies.
AC is the form in which electric power is delivered to businesses and residences.
One advantage that AC has over DC is that it can easily be “stepped up” or “stepped down” with a transformer. In other words, a transformer can take a low-voltage current and make it a high-voltage current, and vice versa.
transformers
allow for conversion of low-voltage electricity into higher voltage electricity. reduces losses incurred in transmission.
transformers that step transmission voltages (in the tens or hundreds of thousands of volts range) down to distribution voltages (typically less than 10,000 volts).
network effect
Metcalfe’s Law
occurs when the value of a service provided increases exponentially with a number of participants on the network
proportionate costs to provide service to ea. person falls as more people are added to the network
this creates a powerful incentives for utilities to scale quickly and eliminate competition
Public Utility Holding Company Act (PUHCA)
1934/1935. PUHCA + Federal Power Act –> changed how utility holding companies operate. utilities had to be more closely governed, provide transparency, obtain regulatory approval
this legislation created a REGULATORY BARGAIN among utilities, ratepayers, and state regulators to help rationalize the provision of electricity. Utilities could carve out monopoly territories, but would be subject to rate regulation
Busbar
grid typically begins here.
the point that a generator connects to the grid (typically at an electric substation). functions as a conductor of the electricity generated into the grid
a good place to measure the Q of energy AND cost/P. location where all of the costs of Generation are accounted for – and no T&D costs have yet been incurred.
Transmission
requires converting electricity to higher voltages to decrease line losses.
most electricity needs to be transformed into lower voltages (step-down transformers) to enter into distribution grid
Distribution
at the distribution grid, power can be delivered to medium-sized customers or stepped down further to go to commercial or residential facilities
US standardized output 120V
Frequency
US - 60Hz
Eur - 50 Hz
both voltage and frequency of delivered power in transmission systems matter
Load
electricity in motion which is nearly instantaneously linked from the source/generator to the final user (Customer Load)
Voltage
x
Base load
portion of the load that’s always being demanded, there’s always some amount of electricity required
Peak load
the load that occurs when the system is operating near its max. not simply the peak of a given day, but a load that is requiring the delivery electricity near max amount for any time during the year.
the system must therefore have some reserves to meet highest needs, even if they only occur for a few days/year
Load duration curve
shows the spread of loads across hours
takes the load levels for each of the 8,760 hours/year and sorts them so that the hours w/ the highest load comes first and then in declining order
ADD GRAPH
Capacity factor
net capacity factor/load factor
ratio of its actual output over a period of time TO its potential output if it were possible for it to operate at full nameplate capacity indefinitely
= (total amount produced in time unit) / (amount of energy produced at full capacity)
spinning reserves
generation assets that are required to be available AND to be operating in sync w/ other generating assets so that they can provide rapid replacement of unexpectedly lost generation
ancillary services
short and long term physical planning and system reliability svcs including:
(1) operating reserves
(2) failure protection
investor owned utilities
private. standalone operating entity (or collection) within a holding company structure owned by shareholders
fewer than 300 IOUs make up 60% of all electricity sales
public owned utilities
owned by state or municipal govt agencies
tend to be less heavily regulated than IOUs
avg size of POUs is small – each serves an average of less than 20,000 customers. make up about 11% of electricity sales
cost of service recovery
utility expenditures to meet demands of customers and other regulatory objectives – allows utility to recover its costs and achieve fair return but no more.
Total Rev = Total Cost = (Rate base - Depreciation)Rate of Return + operating expenses + annual depreciation cost + Taxes
rate base
accumulated amount of investment of utility that is evaluated on an annual basis
represents the aggregate investment made by utilities MINUS any accumulated depreciation previously expensed against those assets
stranded costs
Re. electric power gen: represents the existing investments in infrastructure for the incumbent utility that may become redundant in a competitive environment.
WACC
weighted average cost of capital
regulators examine a utility’s cost of:
cost of debt
cost of equity
debt/equity proportions
to calc WACC – which shows aggregate of the market returns required for such a portfolio
decoupling
separating the total revenue that can be recovered from the actual kilowatt-hours that customers use
usu. to incentivize utilities to engage in energy efficiency programs
public utilities commission
most of the burden for managing the investment and utility regulatory processes falls on state PUCs
usually handles individual operator-level or holding company management issues
usually tasked with: COSR, rate base, rate design, funding decisions of utiltiy, integrated resource planning, maintaining operator and system reliability/quality, meeting ESG objectives,
interconnection
interconnection/wide area synchronous grid
large parts of the world are connected together
3 major interconnections in the US (east, West, Texas)
intermittency
a particular type of resource availability risk relating to kinetic energies (wind, sun, waves)
debt service coverage ratio
ratio comparing how much cash the project generates and is available to pay the periodic (monthly/annual) payments promised to lenders in the loan agreement
hurdle rate
expected rate of return
if a project meets or exceeds their hurdle rate, the project may go forward
net present value
an absolute amount, calculated in present terms. the sum of all the cash flows (both pos and neg) - that a project will generate over its life. It includes up-front investment costs AND cash flows relating to revenues, operating costs, and cost of supply
NPV = -Co + (C1/1+r)….(Cr/[(1+r)^r])
not useful for comparing projects
internal rate of return
IRR represents the discount rate for a given set of cash flows that would set the NPV for those cash flows equal to zero.
higher IRR = greater return from cash flows
hurdle rate = minimum acceptable IRR
