Comparative studies on transmission loss allocation methods for competitive electricity markets

Transmission losses are a significant component of the amount of power to be generated in order to meet the power demand. Today, in competitive operating under pool-based, bilateral contracts or hybrid model, transmission losses must be allocated among the market participants. This process should take in account the buyer and seller spatial locations on the network as well as the non-linear interaction among simultaneous transactions in order to reflect the real market operation and adequate economic efficiencies. In this paper, six recent and relevant methods for transmission loss allocation in power systems operating in a deregulated competitive environment are discussed and compared. Test results using the IEEE14-bus and the standard WSCC 9 bus system are presented. Relevant conclusions, comments and suggestions are also included.