Electricity transmission pricing: tracing based point-of-connection tariff for Indian power system

Abstract

Amongst the commonly employed transmission pricing philosophies in the decentralized markets, i.e., point-to-point and point-of-connection (POC), the later one can be employed for both power exchange (PX) and bilateral trades. POC methodology charges a single rate per MW, depending upon the point of connection. The methodology though apparently simple, easy to implement and understand, entails the difficult task of fixing up the POC rates. Use of grossly aggregated zonal postage stamps as POC rates damps out the locational signals, while the use of LMPs to devise the spatially variate point charges fails to account for the transmission sunk costs. To overcome the above limitations, we propose a methodology to determine POC rates based on real power tracing. We introduce the concept of tracing based locational transmission price (LTP) which reflects participation of each node in the transmission line flows and hence the sunk costs of the associated lines. Thus, LTP transforms transmission usage of each node into spatially variate price signals. The proposal is specifically worked out for the Indian power sector where realistic data of 193 bus system of Western regional (WR) grid is used. The POC rates thus calculated would find their practical utility once the PX activity starts in India.