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The electricity power utilities in many countries have been, or are being, restructured. This has been driven by the desire of Government to meet the increasing demands for electricity by encouraging independent power producers. The consumers are allowed to choose their electricity supplier on the basis of price and service provided. In a deregulated system, operators goals are balancing consumer power demand using the available generation and ensuring that economical and technical constraints are respected. The prime economical aspect is the social benefit, i.e. power suppliers should obtain maximum prices for their produced energy, while consumers should pay the lowest prices for the purchased electric power. Prices have to be defined in a free market economy and restricted only by power exchange rules. Charging methodology is one important scheme in the deregulated environment in the way that it can be utilized to recover the investment cost from network users according to their different impact on the network [3]. The long-run incremental cost (LRIC) pricing methodology developed by University of Bath in conjunction with Western Power Distribution (WPD,UK) and Ofgem (the office of gas and electricity markets, UK) has drawn lots of attention from industry and academic circles and found its application in practice. Compared with the existing long-run cost pricing methodologies, this charging model can produce forwardlooking charges that reflect both the extent of the network needed to serve the generation/demand and the degree to which the network is utilized. The traditional LRIC pricing is based on the premise that the demand in the system is continuously growing over time, and there will always be a need for network reinforcement some time in future, which has been modified to reflect how a nodal increment might change the loading level of the distribution system with a negative load growth, and how this change can be translated into the costs/benefits to the network [1, 2].
TRANSMISSION
DISTRIBUTION
2.1 Forces behind the Restructuring of Power System 2.1.1 Unfair Tariff RatesSince transmission, distribution and generation were handled by a single utility, the tariff was the average of all the costs of the different services including generation, transmission and distribution and distributed among all consumers equally.
2.1.3 Political and Ideological ChangesThe reform structure depends or influenced by party politics in most cases.
2.1.4 Technological AdvancementThe advance in technology makes low cost power plants owned by independent power producers very efficient. These independent power producers would not emerge without reform.
2.1.5 Environmental ImpactWithout the reforms most of the generation was dependent on fossil fuels and hence reform movement was required to decrease the dependence of electricity generation on fossil fuels and introduction of renewable energy like solar, wind etc. and thus decreasing the environmental impact of electricity generation.
2.2 Important Features of Deregulation 2.2.1 Vertically Integrated System Changed to Unbundled SystemEarlier the three components were bundled, if power system were operated and monitored by a single utility but with the reregulation the components of power system were unbundled.
ELECTRICITY MARKET
GENERATION
TRANSMISSION
DISTRIBUTION
Fig. 2.2 Different components of Reregulated Power System The structural components representing various segment of electricity market are:
Generation Companies (Gencos) They are responsible for operating and maintaining generating plant in the generation sector and in most cases owns the plant.
Scheduling Coordinators (SCs)SCs aggregate participants in the energy trade and are free to use protocols that may differ from pool rules. Competing Generators Bid Dispatch Independent System Operator Ancillary Services
Power Exchange
Sell
Forecast
Monitor
Control
Distributors
Transmission Facilities
2.2.2 Regulated Cost Changed to Unregulated PriceSince earlier the power system was a monopoly the tariff plans etc. were decided and fixed single handedly in a regulated manner. With deregulation many companies entered in the business of power system and tariffs etc. were decided by the market forces in an unregulated manner.
2.2.3 Consumer Changed to CustomerWith deregulation many companies entered in the business of power system and hence the consumers which earlier had no choice changed to customer who can chose from a verity of tariff plans, suppliers etc.
2.2.4 Monopoly Changed to CompetitionEarlier power system was a single utility and hence was a natural monopoly. With deregulation many players came into the market and competition was introduced.
Postage Stamp MethodIt depends only on the amount of power moved and the duration of use,
irrespective of supply and delivery points, distance of transmission usage or the distribution of loading imposed on different transmission circuits by a specific transaction. Contract Path/MW Mile MethodIn this method, a specific path between the points of delivery and receipt is selected for a wheeling transaction called contract path. Loading of each transmission line due to each transaction is obtained and multiplied by the line length and summed over all lines in grid to find use of grid by the transaction. Transaction charged in proportion to their utilization of grid. But in this power flow outside the contract path and to neighboring utilities is not considered. 3.3.2. Incremental Transmission PricingAccording to this paradigm only the new transmission costs caused by the new transmission customers will be considered for evaluating transmission charges for these customers. The existing system costs will remain the responsibility of utilities present customers .Incremental cost of a transaction is evaluated by comparing the transmission system cost with and without the entire transaction. It also considers the reinforcement cost in it. Short-run incremental cost pricing (SRIC) Long-run incremental cost pricing (LRIC)
3.3.3. Marginal Cost PricingIt is the cost of loading a marginal increase in transacted power. In this approach multiply the cost for a unit of additional transaction by the size of the transaction [2]. Short-run marginal cost pricing (SRMC) Long-run marginal cost pricing (LRMC)
to which the network is utilized. As being able to send forward-looking signals to influence prospective network connections, this charging model has been adopted by WPD in its EHV network and is being under consideration by several other DNOs [2, 4].
Where,
reach
, and with a chosen discount rate of d, the present value of future investment will be
Where,
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The incremental cost for circuit is the annuitized change in present value of future investment over its life span, (4
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Use of system charges Fig 4.1 Flow Chart of LRIC Charging Model
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For an underlying negative load growth rate, the asset utilization in the network can still vary significantly from one place to another. If the assets loading level is very low, i.e., the asset has a huge spare capacity, and if this capacity is still increasing due to a negative load growth, then there are great benefits to the network operator if the assets loading level drops to zero. Through network charges, DNOs can encourage demand customers to leave early or encourage distribution generation (DG) to connect at an appropriate point in the network. If on the other hand, the assets loading level is very high, then there would be little benefit to encourage demand to leave or DG to connect.
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An extended LRIC model that calculates network charges for network assets with prolonged negative load growth rates. The model aims to reflect: The magnitudes of benefit to the network in the future when the assets utilization drops to zero and How a nodal perturbation might accelerate or delay the future benefits. For network components that support a nodal power injection or withdrawal, there will be an associated credit if the benefit is accelerated or a cost if it is delayed.
5.2 Mathematical Formulation of Long-Run Incremental Cost Pricing For Negative Growth Rates
The time horizon to reach the network benefit is the time taken for the circuits loading level to fall from the current level to zero, or for the unused capacity to grow from the present level to the full capacity. The LRIC charge for the circuit is the difference in the present value of future benefits with and without the nodal perturbation. The proposed charging model can be implemented through the following steps. Deriving the Time Horizon to Reach Network Benefit: (5.1) Where circuit has a maximum allowed power flow of the number of years it takes , to grow to , supporting a power flow of , ,
is the Spare capacity increasing with the rate For a very small and
the equation must be zero; this leads to (3) giving the relationship between the growth rate of the spare capacity and the load growth rate: (5.3) Using to from (5.3), the number of years for the circuits spare capacity to grow from
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Rearranging the equation gives the time to reach the benefit as (5.5) Evaluating the Present Value of the Future Benefit: Assume that investment will th year when the circuit utilization reaches , and with a chosen discount
occur in the
rate of d, the present value of future investment will be (5.6) Where, , is the modem equivalent asset cost. Evaluating the cost of an additional Power Injection or Withdrawal at node N. is as a result of a nodal injection , to year at node N, defined
(5.7) Equation (5.8) gives the new investment horizon as (5.8) The new present value of future reinforcement becomes, (5.9) The change in present value as a result of the injection is given by
(5.10)
Calculating the Long-Run Incremental Cost: The long-run incremental cost for
circuit is the annuitized change in present value of future investment over its life span, the nodal LRIC charges for a node are the summation of incremental cost over all circuits supporting it, given by
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(5.11)
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Bus 1
Lf
Bus 2
D Fig. 6.1 Two busbar network with demand D 104 3.6 3.3 3.0 2.7 2.4 2.1 1.8 1.5 /MW/year 1.2 0.9 0.6 0.3
0 20 40 60 80 100
% Utilization Fig. 6.2 LRIC charges for Negative and positive Load Growth rates
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For a negative growth rate, withdrawing power will increase the loading level of the circuit, thus delaying the network benefit. The customer will be charged; this is illustrated by the solid line in Fig.6.2. When the circuit utilization is high, it takes a long time to reach the network benefit; thus, the present value of future benefit would be very small. However, if the circuit utilization is low, there would be imminent benefit to the network if the last few customers would leave the network, thus having huge charges for additional power withdrawal. In contrast, a positive load growth rate will require network reinforcement in the future; withdrawing power from node 2 will bring forward the time to reinforce the circuit, thus giving rise to LRIC charges as shown by the dotted line. At high utilizations, additional power withdrawal would trigger imminent reinforcement, hence having huge network charges.
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Chapter 7 Conclusions
Long-run incremental cost pricing methodology utilizes the headroom of network components to translate the investment horizon with and without the nodal increment into an incremental cost to the network .Unlike the existing long-run charging models, it does not need to assume the size and siting of future generation or demand. Instead, it relies entirely on the capability of the existing network to accommodate future generation and demand, and thus provides a forward-looking economic price signal to proactively influence the development of future generation/demand. This in turn helps the network planners to form a more realistic projection in the future generation/demand patterns in forward planning their networks. This charging model respects both the extent to which a network is used as well as the level of utilization of the network components. The LRIC charges monotonically increase as the degree of the circuit utilization increases reflecting the acceleration of future reinforcement. The present LRIC charging principle is based on the assumption that demand across the entire distribution network is continuously growing over time and there would always be a need for network reinforcement some time in future. In reality, there may be some parts of the network with prolonged negative growth rate. The proposed pricing principle seeks to directly relate a nodal power perturbation to its benefit to the network. This report illustrated that network charges could vary drastically depending on the assumption of underlying load growth rates.
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References
[1] Furong Li, Chenghong Gu, Long-Run Incremental Cost Pricing for Negative Growth Rates, IEEE Transactions on Power Systems, 2011. [2] Chenghong Gu, Furong Li, Lihong Gu , "Application of long-run network charging to large scale systems",2010 7th International Conference on the European pp.1 5,2010. [3] Loi Lai Lei Power System Restructuring and Deregulation, (Edited), John WileySons Limited, 2001. [4] D. Shirmoharnmadi, X.V. Filho, B. Gorenstin et al., "Some fundamental, technical concepts about cost based transmission pricing , IEEE Transactions on Power Systems , vol. 11, no. 2, pp. 1002-1008,1996. [5] F. Li, and D. L. Tolley, "Long-Run Incremental Cost Pricing Based on Unused Capacity," Power Systems, IEEE Transactions on Power Systems, vol. 22, no.4, pp. 1683-1689, 2007.
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