Distributed spot pricing in radial distribution systems

Spot pricing is a method for pricing electricity that maximizes the economic efficiency of the power system. The authors derive an expression for the spot prices in a radial distribution system, in terms of system quantities such as power line flows. The system´s radial structure leads to simplified spot price expressions. They do not assume that all the problem data is available at one location (i.e. to the utility). The proposed pricing algorithm addresses the issue of decentralized knowledge by using a distributed processing scheme, which emphasizes local computations. They also show how line flow constraints can be implemented as an integral part of the proposed spot pricing algorithm