DCOPF-Based LMP simulation: algorithm, comparison with ACOPF, and sensitivity

The locational marginal pricing (LMP) methodology has become the dominant approach in power markets. Moreover, the DC optimal power flow (DCOPF) model has been applied in the power industry to calculate locational marginal prices (LMPs), especially in market simulation and planning owing to its robustness and speed. In this paper, first, an iterative DCOPF-based algorithm is presented with the fictitious nodal demand (FND) model to calculate LMP. The algorithm has three features: the iterative approach is employed to address the nonlinear marginal loss; FND is proposed to eliminate the large mismatch at the reference bus if FND is not applied; and a deduction of system loss in the energy balance equation is proved to be necessary because the net injection multiplied by marginal delivery factors creates doubled system loss. Second, the algorithm is compared with ACOPF algorithm for accuracy of LMP results at various load levels using the PJM 5-bus system. It is clearly shown that the FND algorithm is a good estimate of the LMP calculated from the ACOPF algorithm and outperforms the lossless DCOPF algorithm. Third, the DCOPF-based algorithm is employed to analyze the sensitivity of LMP with respect to the system load. The infinite sensitivity or step change in LMP is also discussed.