The Unscrambling of Marginal Cost Algorithm in Power Market

In this paper a deep research is made on the application problems of marginal cost in electrical market. Beginning with the description of the origin of marginal cost in microeconomics and its introduction into power system, it derives the problems existing in current marginal cost method using for calculating power price after analyzing the application premise of both. This paper also shows that it is difficult to accept that putting products, output and cost as the premise of the marginal cost in economics, as well as using them in the inter-coupling power systems. It can only be used under certain circumstances which neglects that any nodal voltage is maintained together by all nodal injected power. The variation trend for the tangent slope of the points on cost curves is various in theory, and some of them simply cannot be used for showing the marginal cost. When it comes to the problem of the application, for merely considering the POOL mode, it gives rise to the test for the Equity and Fairness on Power Market in bilateral transaction or multilateral transaction.