Improving Long Run Marginal Cost based Pricing along with Extended Benefit Factor method for Revenue Reconciliation of Transmission Network in Restructured Power System

Abstract : There are several methods to cover the costs of a transmission system and distribution networks. These methods are divided into either incremental or marginal approaches, which can be either long-term or short-term. The main difference between the incremental and marginal approach is how to calculate the cost of using the network. In the incremental approach, simulation and in the marginal approach, cost sensitivity analysis methods are used to determine the cost. If the tariff is based on the optimal nodal or regional prices, that is a short-term approach, then it only considers the existing equipment. Unless cost optimization is combined with network design optimization. Since the nodal pricing principle is to generate the economic signal, the tariff does not cover the entire network cost. Long-run incremental or marginal approaches can be used to create incentives for future investment. In this paper, a long-run marginal approach has been modified to create the economic signal for the future investment, which can show the effect of power injections on the buses over the long-term costs of the network reinforcement. At the same time, since the marginal approach does not cover the full cost of the network, extended benefit factor method have also been used to compensate for the lack of income. A practical distribution network is used to illustrate the theoretical and practical principles of the proposed solution. Results are compared for different system conditions. The results show that the price of the proposed solution involves not only the future development costs of the network but also the distance between production and consumption and shows the factors that affect network tariffs.