Abstract
During the regulated power system era, the three major components of the power system are treated as a single entity and managed by same firm. Electricity was then treated more as a welfare commodity based on political patronage. With the wide adoption of deregulation, which resulted in the wholesome privatization and commercialization of the generation and distribution components, the transmission facility was left in the hands of the Government. Considering that this is a sure link between the other two, there is greater need to develop a mechanism for its appropriate tariff determination in order to ensure fairness to all its users. A significant deficiency in its pricing is the non-inclusion of the reactive power component, which is seriously needed to ensure system stability. This work involved the performance evaluation of four embedded transmission pricing models. Based on the need to build-in payment for reactive power which is necessary to ensure system stability, further presents an improved postage stamp transmission tariff-pricing model that incorporates both real and reactive component of power. The Postage stamp method calculates all the network costs and divides it by the overall power transmitted through it. This single rate is charged to users irrespective of the source and destination of power transactions. This is a simpler, fairer and easier to implement approach for computation using Matlab and Excel Software packages. The proposed method gave average price of 29.48$/hr as against $27.75/hr when reactive power was not included for the South African 18-Bus System. This showed slight improvement when compared to the conventional approach where reactive power was not included in the power transaction. It may be applied in developing countries like Nigeria where Government is gradually pulling out of full funding of the power sector, and seeking for technically sound and financially buoyant local and foreign firms to take over significant part of the sector. The distance flow based and cost flow based methods showed very higher costs which may not be suitable for developing countries at their present stage of deregulation due to very low income per capita and low level of industrialization.
Highlights
The traditional power system that existed over the years involved an aggregation of the three major components of the power system as a single entity
The results are presented in two cases for the South African eighteen bus and the Institute of Electrical and Electronic Engineering thirty (IEEE-30) bus, and are presented ; Case 1: In the South African 18 bus test system, four transactions were carried out
The implication is that those transactions that introduce reactive power and cause instability in the system are charged more while those transactions that lead to more stability are charged less
Summary
The traditional power system that existed over the years involved an aggregation of the three major components of the power system as a single entity. Such costs are dependent on the estimation of the future energy consumption and peak loads [4], [5] In this scheme, the marginal operating and reinforcement costs of the system are used to calculate the American Journal of Electrical Power and Energy Systems 2017; 6(3): 16-26 price for a transaction [1]. Composite Embedded/Incremental Pricing incorporates existing system costs and the incremental cost of transmission transaction It solves the common problems associated with both by combining their advantages. Most developed countries like USA that have practiced deregulation for a long time and electricity fully paid for by consumers use locational marginal pricing model for most of its transmission [13] while South Africa presently uses quasi postage stamp transmission pricing mechanism with distance flow based method [14]. It is expected that each country will apply a method that suits her level of deregulation and economic development
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