Continuous Locational Marginal Pricing (CLMP)

This paper proposes a solution to eliminate the step change in the curve of location marginal price (LMP) with respect to load variation. The new solution is named continuous locational marginal pricing (continuous LMP or CLMP) because it is a continuous function with respect to load. The present LMP methodology leads to a step change when a new constraint, either transmission or generation, becomes binding as load increases. Similarly, there is also a step change of LMP if an existing constraint is no longer binding when load decreases. The proposed CLMP methodology smooths the step changes in the price curve and introduces a fourth component, future limit risk (FLR) price, in addition to the present three LMP components, Energy Price, Congestion Price, and Loss Price. Also, FLR is an indication of how close the present system state moves to the next constraint. An algorithm is proposed in this paper to give a technically efficient method to calculate CLMP and FLR price. Two case studies are presented to demonstrate the proposed CLMP methodology.