Abstract
The allocation of ohmic losses in the transmission system with a method that complies with the requisite of cost causality is critical for sending location-specific, efficient economic signals to transmission system users, and to incentivize the efficient use and expansion of the electricity system. In this paper, we employ a formulation of the Incremental Transmission Losses allocation method that is derived from the equations of the linearized power flow to assess the possible impacts that adopting a causal allocation method would have on generation pricing for long-term contracts in Brazil - a country in which a pro-rata method (which does not result in location-specific economic signals) is currently used. While assessing these impacts, we focus on treatment of risk from the generators' perspective.
Impacts of causal transmission losses allocation on generation pricing for long-term contracts in Brazil
