Transmission pricing of active and reactive power, congestion pricing, and supplemental cost allocation method: a case of Philippines | |
| Author | Rotoras, Ricardo E. |
| Call Number | AIT Diss no.ET-02-01 |
| Subject(s) | Electric power transmission--Costs Electric power transmission--Philippines Direct costing--Philippines |
| Note | A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Engineering, School of Environment, Resources and Development |
| Publisher | Asian Institute of Technology |
| Series Statement | Dissertation ; no. ET-02-01 |
| Abstract | Economically efficient transm1ss1on pricing has been considered as a critical link to success in deregulating the electric power industry. When competition is being introduced into the generation market, transmission pricing must become a medium that also supports competition and sends correct economic signals, which are very important to ensure economic efficiency. The optimal pricing literature emphasizes the benefits of pricing at marginal costs. Under marginal pricing, the efficient cost of transmission between two locations is defined as simply the difference in incremental costs of power between those two points on the network, representing the short-term transmission prices consistent with efficient short-run operation. However, it has also been found that marginal pricing of transmission services is highly volatile especially during constrained conditions, may result in under-recovery of capital, and provide perverse signals to a transmission utility not to improve the performance of the network and retain congestion. Transmission constraints arise from two major sources: thermal and voltage constraints. Thermal constraints deal with real power transfer while voltage constraints deal with reactive power flow. The use of an AC model allows exact representation of the marginal transmission cost, capturing the actual effect of losses and congestion arising from both thermal and voltage constraints. Though it is already recognized that reactive power flow is important as it affects both real losses and voltage constraints, most emphasis in transmission pricing is on real power flow only. This study investigates marginal cost pricing of transmission services of real and reactive power in an actual network in the Philippines using an AC-OPF model. Transmission costs of reactive power are calculated using a de-coupled OPF fo1mulation consisting of reactive power sub-problem. Sensitivities of marginal transmission costs to load levels, thermal and voltage constraints, are determined. These transmission costs are decomposed to reflect transmission losses and congestion. Results of simulation studies showed that variation in transmission costs (real and reactive power) in year 2000 among load buses is relatively small, but they are both quite sensitive to load levels exhibiting a near linear characteristic. The effect of voltage security limits is not only confined to reactive power but also seriously affects the transmission costs of real power. On average, the transmission costs of reactive power calculated using a decoupled OPF formulation is only 0.33% of the real power. However, the transmission costs of real power when both the thermal and voltage constraints are considered is 19% higher than in the case when only the thermal limits are considered. Decomposition of transmission costs corresponding to year 2000 showed that the transmission losses have dominated over congestion cost and though only few lines/buses experienced constraints, a nonzero congestion charge exists on each line in the system, not just the line that experienced congestion constraints. The congestion charges resulting from decomposition of transmission cost into losses and congestion provide the key to defining capacity rights in the transmission network. The use of capacity rights (also known as transmission congestion contract) provides alternative measure to hedge price risk, and it can also be used to facilitate optimal expansion on the grid. Additional simulation studies are conducted to calculate transmission costs in year 2004 and evaluates how the marginal network revenue changes as the network is getting heavily loaded. Results of simulation studies showed that transmission costs have increased remarkably in almost all buses on the network in year 2004, which resulted in significant increase in marginal network revenue amounted to 433% from year 2000 to 2004. However, comparison between the marginal network revenue and the transmission utility's revenue requirement (regulatory requirement) showed that the network income is still well below of what is required, and thus supplemental income is necessary so that transmission utility can operate viably. This study proposes a supplement cost allocation method based on incremental power flow technique taking into consideration simplicity and equity in allocating supplemental charges. The proposed method is compared with the postage stamp and applied in the Philippine transmission system. Despite the limitation of marginal cost pricing in cost recovery, however, application of this method is desirable because of the correct economic signals they can provide to transmission users and system operator, and the consistency of marginal transmission charges with the electricity prices available at the spot market. However, in order for the transmission utility to recover its total transmission costs, a blending in a two-part tariff consist of embedded cost and short-run marginal cost is needed. |
| Year | 2002 |
| Corresponding Series Added Entry | Asian Institute of Technology. Dissertation ; no. ET-02-01 |
| Type | Dissertation |
| School | School of Environment, Resources, and Development (SERD) |
| Department | Department of Energy and Climate Change (Former title: Department of Energy, Environment, and Climate Change (DEECC)) |
| Academic Program/FoS | Energy Technology (ET) |
| Chairperson(s) | Surapong Chirarattananon;Pacudan, Romeo B.; |
| Examination Committee(s) | Lefevre, Thierry;Tang, John;Green Richard; |
| Scholarship Donor(s) | The Philippine Government through the Mindanao Advanced Education Project-Commission on Higher Education (MAEPCHED); The Mindanao Polytechnic State College; |
| Degree | Thesis (Ph.D.), Asian Institute of Technology, 2002 |