Comparative effectiveness of loss allocation methods for providing signals to affect market operation

摘要

The distribution of system losses, an integral part of electricity pricing, can play an important role in the operation of electricity markets. To date, despite the existence of many loss allocation methods, no one method is commonly used in established electricity markets. Furthermore, some markets are still considering using different methods that will provide more efficient treatment of losses and aid in improving market operations and structures. This paper compares the loss allocation methods used in existing markets in Eastern Australia and Great Britain, as well as with the pro rata and proportional sharing approaches. Through implementation of the loss allocation methods on the CIGRE Nordic 32 bus system we examine what behaviour each method encourages. Results suggest that the method used in the Australian market provides the most sophisticated signal to market participants. Similar results, however, can be obtained using the simpler approach taken in Great Britain. This reinforces that the selection of loss allocation will be a market dependent problem.