Research on the allocation mechanism of the LMP-based electricity market surplus

Locational Marginal Pricing (LMP) is a novel pricing electricity approach based on short term marginal cost. Compared to the conventional average accounting cost method, the LMP has the merits of real time reflecting electric energy's production cost, stimulating the customers' reasonable...

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Bibliographic Details
Published in2010 5th International Conference on Critical Infrastructure (CRIS) pp. 1 - 6
Main Author Youmin Li
Format Conference Proceeding
LanguageEnglish
Published IEEE 01.09.2010
Subjects
Contracts
LMP
market surplus
transmission right
transmission service
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Summary:Locational Marginal Pricing (LMP) is a novel pricing electricity approach based on short term marginal cost. Compared to the conventional average accounting cost method, the LMP has the merits of real time reflecting electric energy's production cost, stimulating the customers' reasonable electricity consumption and reducing cross subsidies, etc. But the difference among different LMPs results in the market surplus on the spot market settlement, which is regarded as network rental. How to reasonably deal with this market surplus is of significance to improve market competition and ensure fair competition. This paper first gives the proof that market surplus is theoretically greater than zero, but affected by many factors; then compares the four allocation methods: transmission right, bilateral contract, receiving electric energy and transmission fee. Then the paper proposes an approach on allocating the market surplus based on transmission usage. Lastly the treatment to surplus deficiency is discussed.
ISBN:1424480809
9781424480807
DOI:10.1109/CRIS.2010.5617580