Abstract
This manuscript presents a basic concept of nodal price modeling in a competitive electricity market and some special considerations on its formulation. Nodal prices represented by locational marginal prices (LMP) based settlement strategy is carried out in a deregulated market environment to establish the amount of money received by generation companies from system operator and paid to system operator from customers. In this approach, cost of transmission services is implemented together with LMP which represents energy price, network losses cost, and transmission congestion cost. The results show that the proposed method has a better performance than the use of conventional approach.
Highlights
In a competitive market environment, bottlenecks in the transmission line will be an obstacle for perfect competition among the market participants
The author in this paper introduces a scheme for incremental cost-based energy pricing model to deal with congestion including losses and transmission usage tariff, but simplify the method and have acceptable transparency so that it may correctly send an economic signal to the market participants
It is used with the intention to maintain the linearity and superposition features of the locational marginal price (LMP) model while still able to account for both congestion and losses cost [17]
Summary
In a competitive market environment, bottlenecks in the transmission line will be an obstacle for perfect competition among the market participants. One obvious drawback of transmission constraint is the congestion problem. Other significant issues that should be addressed in transmission management are network usage tariff and losses [4, 5]. Transmission usage tariff is defined as embedded-cost, while [6] classified it as use-of-transmission-system charge. This is to convert stranded costs and O&M costs into transmission charge cost, which refers to the previous capital cost acquired in the transmission infrastructure development and maintenance [7,8,9,10]. The last aspect in transmission management is the cost of losses in the network. Market operator is responsible to alleviate network congestion to maintain the security and efficiency of power system operation in order to ensure all market participants have the same rights to access transmission system without any discrimination [2, 16]
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