Power loss allocation in pool-based electricity markets

Although real power is the main traded commodity in electricity markets, reactive power plays crucial roles in power systems reliability and security. Market participants utilize the network differently to maximize their profits. It means that their effects on the system, such as losses, can also be different. The development of a fair and accurate loss allocation scheme for real and reactive power is significant to avoid cross subsidies and to have the correct charge for each participant. This paper introduces a new method to allocate real and reactive losses in pool-based markets. The basic idea assumes that network users have their own effects on the system as well as their interactive effects which are based on their contributions to currents flows. The proposed method determines these contributions and adjusts them, due to system nonlinearity, according to current adjustment factors (CAFs). Unlike other approaches, the proposed method can easily and effectively allocate real and reactive power losses simultaneously without any additional calculation except the substitution of line reactance instead of resistance. The proposed method is illustrated on a simple system and tested on the standard IEEE-14-bus. Results have shown validity and consistency of the proposed method.