Economic impact on a conventional utility of non-utility generation producing energy from a non-conventional source

When a utility buys electric energy from a nonutility generator (NUG) at short notice, such as a few hours, one of the difficult issues encountered by the utility is the evaluation of the rate (buyback rate) it should pay the NUG such that the utility maximizes its economic benefit. This problem is magnified when NUG produces energy from nonconventional source, wind. Short term buyback rates should be based on the operating cost that a utility avoids by utilizing energy from a NUG. This cost is termed as the avoided operating cost (AOC) in this paper. A comprehensive technique for a thermal power utility is developed to assess the short term AOC. The IEEE-RTS is considered to be a thermal utility in this paper, which is utilized to demonstrate the technique. Some sensitivity studies have been performed and selected results are discussed in the paper