Designing Advanced Locational Marginal Pricing Schemes and FTR Instruments for the Power Market

Vaishya, Shri Ram and Sarkar, Vaskar (2018) Designing Advanced Locational Marginal Pricing Schemes and FTR Instruments for the Power Market. PhD thesis, Indian Institute of Technology hyderabad.

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The deregulation in the electricity market was introduced to alleviate the monopoly in the market. It introduces competition among market participants. As a result, the market e�ciency improves. However, deregulation causes the operational concerns for the allocation of the scare transmission capacity. The problem of transmission allocation, in principle, can be solved by locational marginal pricing (LMP). Although the LMP is an e�cient way of the pricing and congestion management, it causes the inherent price risk for the forward contract in terms of the uncertain congestion charges. The price risk caused by LMP can be alleviated by the introducing the �nancial transmission right (FTR) in the electricity market. The establishment and maintenance costs of the transmission lines are recovered through separate transmission pricing mechanism. In addition, reactive power costs are also recovered from the load entities as uplift charges. Transmission and reactive power pricing are still performed by a regulatory procedure. The motivation of this thesis is to design the advanced LMP schemes and FTR instruments to improve the economical and technical e�ciencies of the electricity market. In this regard, the objective of the thesis is three-fold. The �rst objective is to develop a reactive power constrained LMP framework by considering di�erent types of loads and di�erent types of reactive power compensators. The second objective is to develop an integrated mechanism to price energy and transmission (to recover establishment and maintenance costs), simultaneously. The third objective is to develop an advanced FTR instrument which can hedge the risk posed by both loss and congestion components of the LMP di�erentials. The developed FTR is named as lossy FTR. The lossy version of the option FTR is also proposed. Rules, procedures, and practical implementation of the aforementioned works are established in this thesis. The earlier works on the optimal power ow, locational marginal pricing, transmission pricing, and FTRs are thoroughly investigated. The speci�c contributions of the thesis are summarized as follows. An enhanced 2-D LMP scheme is proposed to price the active and reactive power consumptions, simultaneously. Di�erent types of loads and reactive power compensators, namely, synchronous generator, FACTS devices are considered. Di�erent LMP vectors are obtained for di�erent entities. The LMP vectors are functions of the voltage magnitudes so as to bene�t an entity if it supports the grid for the de�cient reactive power at its location. The concept of transmission side bidding for availing power transmission services through a market mechanism is introduced. The transmission side bidding, in essence, vi refers to the direct market participation of transmission line owners for selling their line capacities with appropriate price o�ers. The transmission o�ers are submitted in a centralized auction conducted by the independent system operator for carrying out dispatch scheduling or for the issuance of transmission rights. Transmission o�ers are jointly cleared along with other bids and o�ers, and bid-consistent prices are established by means of marginal pricing. The uncertainty that is involved in revenues and payments of market players in conventional transmission pricing is thus eliminated. By recognizing the criticality of power ow interactions between di�erent transmission lines, the auction participation of transmission line owners is suitably regulated. The issuance of FTRs is supplemented by assigning counter ow owgate rights to the transmission line owners so as to ensure revenue adequate FTR settlement. A loss compensated DC optimal power ow (OPF) framework is developed for the integrated AC and multi-terminal HVDC system. The losses in the AC and HVDC lines are represented as a piecewise linear function of the terminal-averaged power ow. The piecewise linear representation, eventually, transforms the nonlinear constraints into linear constraints in the OPF formulation. This, in e�ect, reduces the computational complexities involved in OPF calculation. The piecewise linear loss modeling exhibits a typical advantage over the marginal loss modeling in terms of the risk hedging capability of �nancial transmission rights. In addition to the uncontrolled AC transmission lines, the controlled AC transmission lines are also considered. Further, a better curve �tting technique is explored that can improve the power ow accuracy of the piecewise linear loss modeling in the DCOPF calculation. Unlike the available curve �tting technique for the piecewise loss linearization, the proposed curve �tting technique is linked to the loading condition of the transmission line. Detailed mathematical procedure is developed to obtain the solution of the proposed curve �tting optimization problem. The power ow accuracies of di�erent linear and piecewise linear loss modeling approaches are assessed and compared on a realistic ground. A market framework is proposed for the practical implementation of the lossy FTRs. The advantage of lossy FTRs over conventional FTRs is that the lossy FTRs can be settled directly according to locational marginal prices without any decomposition. Therefore, the price risk for a forward contract can be perfectly hedged if the power transaction involved matches the corresponding FTR perfectly. The lossy FTR has not been successful in entering the market because of the prejudices involved in market complexity and ine�ciency. The principal aim of this work is, therefore, to create the necessary environment so as to make those �ne risk-hedging tools available vii in the market. First of all, a suitable format for forward contracts is prescribed to enable proper utilization of lossy FTRs. The detailed lossy FTR auction model is prepared based on a suitable OPF formulation. In addition, the implementation of lossy FTRs is shown for an AC-DC system by appropriately modeling the DC-line power ow behavior according to the chosen OPF framework. The lossy FTR auction model is thoroughly veri�ed for the FTR issuance as per the market expectations. The option version of the lossy FTR is also introduced in this thesis to improve the market e�ciency. The existing lossy FTR theory is based only on obligation FTRs. Although obligation FTRs are the primary risk hedging instruments under any FTR mechanism, option FTRs can improve market competition by allowing exible hedge positions. Therefore, an investigation is carried out to explore a lossy version of option FTRs. The con�guration template and the settlement rule for lossy option FTRs are established. A suitable auction model is prepared for the issuance of lossy option FTRs. The lossy FTR auction formulation is carried out based on a novel representation of power ow equations. Detailed case studies are presented to show the practical utility of the proposed lossy FTR instrument.

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IITH Creators:
IITH CreatorsORCiD
Item Type: Thesis (PhD)
Uncontrolled Keywords: Electricity Market, Locational Marginal Pricing, FTR Transmission Pricing
Subjects: Electrical Engineering
Divisions: Department of Electrical Engineering
Depositing User: Team Library
Date Deposited: 25 Jul 2018 06:36
Last Modified: 21 Sep 2019 06:00
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