Implementation of lossy FTRs for perfect risk hedging under the marginal loss pricing

Vaishya, S R and Sarkar, Vaskar (2017) Implementation of lossy FTRs for perfect risk hedging under the marginal loss pricing. IET Generation, Transmission and Distribution, 11 (1). pp. 166-173. ISSN 1751-8687

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In this study, a market framework is proposed for the practical implementation of lossy financial transmission rights (FTRs). The advantage of lossy FTRs over conventional FTRs is that the lossy FTRs can be settled directly according to locational marginal prices (LMPs) without requiring any LMP decomposition. Therefore, the price risk for a forward contract can be perfectly hedged if the power transaction involved perfectly matches the corresponding FTR. Although proposed long back, lossy FTRs still did not find an entry to the market because of the prejudice of market complexity and inefficiency. The principal aim of this study is, thus, to create the necessary environment so as to make those fine risk-hedging tools available in the market. First of all, a suitable format for forward contracts is prescribed to enable proper utilisation of lossy FTRs. The detailed lossy FTR auction model is prepared based upon a suitable optimal power flow (OPF) formulation. In addition, the implementation of lossy FTRs is shown for an AC-DC system by appropriately modelling the DC-line power flow behaviour according to the chosen OPF framework. The lossy FTR auction model prepared is thoroughly verified for the FTR issuance as per the market expectations.

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IITH Creators:
IITH CreatorsORCiD
Item Type: Article
Uncontrolled Keywords: power markets; pricing; load flow; contracts; perfect risk hedging; marginal loss pricing; lossy financial transmission rights; locational marginal prices; LMP decomposition; forward contract; power transaction; market complexity; fine risk-hedging tools; lossy FTR auction model; optimal power flow formulation; OPF formulation; forward contracts; AC-DC system; DC-line power flow behaviour
Subjects: Others > Electricity
Divisions: Department of Electrical Engineering
Depositing User: Team Library
Date Deposited: 16 Mar 2017 07:12
Last Modified: 21 May 2018 10:11
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