A NEW METHOD FOR LOCATIONAL MARGINAL PRICING

Abstract

The electricity market around the world has undergone major structural change for the past few years thus creating competition. This resulted in unbundling of the vertically integrated utilities such as generation, distribution and retailing. Due the large economies of scale, transmission is a natural monopoly in most countries. As the trend of the electrical industry is heading towards more Open Transmission Access, transmission is on its way to integrate onto the unbundling process to ensure fair and non-discriminatory transmission access. Efficient pricing in transmission service plays an important role that it is necessary to send correct economic signals to transmission users relating to operation of existing capacity, investment in new capacity and forecasted demand. This thesis introduces Available Transfer Capability and proposes Locational Marginal Pricing method including voltage stability constraints in competitive electricity markets and pricing system security. A multi-objective Optimal Power Flow (OPF) approach to account for system security through the use of voltage stability constraints is proposed and solved by means of an Interior Point Method Nonlinear Programming technique, so that the social benefit and the distance to a maximum loading condition are maximized at the same time. Locational marginal prices and nodal congestion prices resulting from the proposed method as well as comparisons with results obtained by means of standard techniques currently in use for solving electricity market problems are presented and discussed. The proposed method is tested on simple test system and on an IEEE 30-bus system considering supply side bidding. Results were obtained using MATLAB 6.0.