A methodology for allocating transmission losses due to cross-border trades

Transmission pricing of cross-border trades is often difficult since individual countries may use incompatible internal transmission pricing regimes, and they are usually unwilling to disclose any sensitive information about their own systems. In this paper, the use of a tracing methodology is proposed to overcome these problems using loss allocation problem as an example. Firstly, a modification of the tracing methodology is presented in which the loss is allocated in a direct way. Then a unifying tracing-based methodology of transmission pricing for cross-border trades is proposed. The only data required are the flows in the tie-lines and the charges to be applied to the border nodes in each country. No information is required about individual transactions, load/generation profiles or internal networks. The methodology is illustrated on the IEEE 118 node network divided into four areas, each with a different internal transmission pricing methodology. The proposed methodology is shown to be simple, transparent and very fast and it can deal effectively with cyclic flows.