Accounting for network energy losses when computing distribution locational marginal prices in a large-scale power system: application to the Spanish case

Abstract

This paper presents a novel approach to compute an electric equivalent network representation that includes the main characteristics of electricity networks in a meaningful way, including relevant aspects that affect the system operation, such as electrical network losses. This equivalent network is incorporated into a security constrained unit commitment and economic dispatch model that computes distribution locational marginal prices (DLMPs). This approach is based on data available from distribution companies with a simplified representation of distribution grids. The model is applied to a Spanish case study and used to compare centralized versus distributed solar PV. Decentralized PV provides important system savings related to network losses reduction, and other related costs such as fuel and carbon emission costs. However, system marginal benefits decrease with PV penetration levels. Therefore, the implementation of DLMPs in electricity markets would be specifically important for creating adequate incentives for generation investments that could be made either centralized or decentralized. The obtained results also show that implementing DLMPs would produce a surplus as a result of the difference between demand payments and generation revenues, of around 4.5 of the Spanish network costs.