Loss allocation in AC OPF-based financial transmission rights auction models

This paper presents two models of AC optimal power flow based Financial Transmission Rights (FTRs) allocation auction. Both models were compared with the conventional DC optimal power flow (DC-OPF) based model. Considering an FTR between two nodes as a real power injection at the source node and a power withdrawal at the sink node; the first model assumes that the net power due to FTRs equals zero. FTRs do not consider loss and the slack node is compensating for the total system losses. In the second model, it is suggested that each FTR's source node is taking care of a portion of the system loss by introducing a power injection. The portion of loss compensation is proportional to each FTR allocated amount, i.e., if one FTR is to use the grid more, then it should compensate more for the loss. To show the validity of all models and the advantages of the new suggested model, numerical examples of a 3-bus system and the IEEE 14-bus system are presented. All results are compared and explained.