Optimal Point Tariffs in Transmission and Distribution using Nonnegative Least Squares Estimates

E.B. Hreinsson (Iceland)


Transmission, pricing, tariffs, optimization, cost


Point tariffs with node, zone or system specific injection and extraction charges are fairly common in power systems, for instance in Scandinavia, where in addition, price equalization is also rather extensive even across a large part of the transmission and distribution system. The paper examines theoretical transmission charges and marginal costs. Their relation to optimal transmission pricing, as determined by full optimal load flow (OPF) models, is examined and leads to an overdetermined set of linear equations. The pricing method proposed and used to determine injection and extraction prices is a nonlinear least squares model. A simple power system representation is examined in the form of a numerical example and implications are discussed for larger, real life size systems in terms of how the overall transmission cost is affected, based on the ideal marginal cost as represented by the nodal Lagrange multipliers of OPF.

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