long-run incremental cost pricing for negative growth rate
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SUMITTED BY-AAKANKSHA DUGAR2008UEE101E-1
Long-run Incremental Cost Pricing for Negative Growth Rate
ContentsRestructuring Power sector
Electricity market components
Components of cost
Transmission Pricing Objectives
Long Run Incremental Cost(LRIC)
LRIC for Negative Growth Rate
Conclusions
References
Restructuring Power Sector
Earlier Scenario
Vertically integrated system
Government monopoly
Lack of competition- making market inefficient
non-payment, theft, overstaffing
ReformsPrivatizing generation
Not attracted investment
Finally unbundling all sectorsGenco
Transmission Owners
Disco
Customer
Unbundling of Utilities
Benefits-Introduced competition
Lower tariffs
Power Transactions based on Price rather than Cost
Quality improved
Revenue increased
Electricity market components
GENCOs
DISCOs
Transmission Owners
Power Exchange (PX)
Independent System Operator (ISO)
Functions of PX
Receive bids from producer and customers
Match bids and decide market clearing price
Provides schedules to ISO
Adjust scheduling when system congested
Functions of ISO
Security maintenance
Assure service quality
Promote economic efficiency and equity
Components and Function
Transmission pricing Objectives It should compensate for the costs of operation
and maintenance of the transmission system;
Encourage the efficient use and development of the network;
Establish a price structure which is economically sound, simple enough for users to understand and transparent to administer;
Provide pricing stability over time;
Long Run Incremental Cost(LRIC)
LRIC charges help to realize constraints and congestion in the network, considering network expansion.
The approach examines how a nodal increment of generation/demand might impact the time to reinforce system assets and then translate the time change into charges.
It can produce cost-effective charges, reflect both the extent of the network needed to serve the generation or demand and the degree to which the network is utilized
Parameters Influencing LRIC Pricing
Load Growth Rate: Represents the increase in energy demand over time
Discount rate: The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.
Present value of future investment cost: future investment can be discounted back to its present value.
Modern equivalent asset cost: It is the current worth of a transmission line system.
Mathematical Formulation of LRIC for Negative Growth Rates
Deriving the Time Horizon to Reach Network Benefit:
For very small value of rs and rd
Using rs
Time to reach benefit is
Evaluating the Present Value of the Future Benefit:
Evaluating the cost of an additional Power Injection or Withdrawal at node N:
If power flow changes by ΔPl due to nodal injection ΔPin
the new investment horizon nlnew is
the new present value of future reinforcement is
the change in present value as a result of the injection is
Calculating the Long-Run Incremental Cost:
annuitizing the incremental cost and calculating the charges for a node
Bus 1 Lf Bus 2
D
Two Busbar Network with demand D
Assumptions:
The circuit Lf connecting busbars 1 and 2 is rated at
45 MW and costs £31293400 at its modern
equivalent asset value. Discount rate of 6.9% and a
load growth rate of ±1%
Demonstration on 2 Bus Network
1% Negative Growth Rate
1% Positive Growth Rate
X 104
3.6
3.3
3.0
2.7
2.4
2.1
1.8
1.5
1.2
0.9
0.6
0.30 20 40 60 80 100
£/MW/Year
% Utilization
ConclusionsLRIC Pricing
does not need to assume the size and siting of future generation or demand.
is based on forward-looking costs.
reflects the extent of the network used .
reflects the degree of component utilization.
The Proposed LRIC model seeks to directly relate a nodal power perturbation to its benefit to the network.
References:1. Furong Li, Chenghong Gu, “Long-Run Incremental Cost Pricing for Negative
Growth Rates”, IEEE Transactions on Power Systems, Article in Press.
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.
ThankYou
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