From voltage level to locational pricing of distribution network: The Brazilian experience

The distribution systems in Brazil are currently priced based on voltage level and time usage. The tariff structure does not take into account the bus or region where the consumption takes place. Only transmission which is represented by lines and substations equal and above 230 kV has been using locational pricing since the end of 90's. The wheeling method is derived from the investment cost related price (ICRP) proposed in UK. So each bus at transmission grid has a nodal price to encompass transmission fixed costs. This locational approach does not continue through the distribution system which has a method that came from the 70's decade that still follows the idea of radial system, i.e., the costs increase as the voltage decreases. Although the peak and off-peak differentiation is considered, the effectiveness of it in terms of distribution operation and planning optimization is questioned. Today, the Brazilian regulators are working in improving the tariff structure including the locational signal and a better time-of-use approach taking into account the characteristics of each Brazilian region. Along with this improvement, the regulators are also studying how to add the new small generators that are spreading around the distribution grid. This paper tries to show how the current price is developed and the future aspects and solutions that the Brazilian regulators are facing in order to promote efficiency and sustainability of distribution energy systems.