**Introduction to Optimal System Operation:**

The optimal system operation, in general, involved the consideration of economy of operation, system security, emissions at certain fossil-fuel plants, optimal releases of water at hydro generation, etc. All these considerations may make for conflicting requirements and usually a compromise has to be made for optimal system operation. Here we consider the economy of operation only, also called the **economic dispatch problem**.

The main aim in the economic dispatch problem is to minimize the total cost of generating real power (production cost) at various stations while satisfying the loads and the losses in the transmission links. For simplicity we consider the presence of thermal plants only in the beginning. In the later part of this chapter we will consider the presence of hydro plants which operate in conjunction with thermal plants. While there is negligible operating cost at a hydro plant, there is a limitation of availability of water over a period of time which must be used to save maximum fuel at the thermal plants.

In the load flow problem has already discussed, two variables are specified at each bus and the solution is then obtained for the remaining variables. The specified variables are real and reactive powers at PQ buses, real powers and voltage magnitudes at PV buses, and voltage magnitude and angle at the slack bus.

The additional variables to be specified for load flow solution are the tap settings of regulating transformers. If the specified variables are allowed to vary in a region constrained by practical considerations (upper and lower limits on active and reactive generations, bus voltage limits, and range of transformer tap settings), there results an infinite number of load flow solutions, each pertaining to one set of values of specified variables. The ‘best’ choice in some sense of the values of specified variables leads to the ‘best’ load flow solution.

Economy of operation is naturally predominant in determining allocation of generation to each station for various system load levels. The first problem in power system parlance is called the ‘unit commitment’ (UC) problem and the second is called the ‘load scheduling’ (LS) problem. One must first solve the UC problem before proceeding with the LS problem.

Throughout here we shall concern ourselves with an existing installation, so that the economic considerations are that of operating (running) cost and not the capital outlay.