Distribution of loss cost using proportional nucleolus method in competitive power markets

The present deregulated electricity industry has evolved into a distributed and competitive industry in which market forces drive the price of electricity and reduce the net cost of electricity. However the competitions in these markets require identification of the use of transmission networks, mainly the participation of utilities in losses caused in the transmission lines. This is because the consumers pay for their actual consumption where as generators are paid for their generation plus losses. Hence the loss cost allocation is of great importance as it should be allocated efficiently to both consumers and producers (both network users). Thus loss cost allocation in competitive electricity market requires a fair and efficient method with right economic signals. In this paper, loss cost allocation methodologies are presented in multilateral transaction frame work. Methodologies in cooperative game theory such as nucleolus, shapely and proportional nucleolus are presented. These are compared with conventional methods for loss allocation. Among all the methods presented, the proportional nucleolus is proved to be the efficient method with right economic signals. All the methods are implemented and results are compared for IEEE 14 bus, New England 39 bus and 75 bus Indian Power System.