A reduced network representation suitable for fast nodal price calculations in electricity markets

Customers' response to change in electricity prices has been identified as one of the key requirements in the emerging restructured electricity markets. However, it becomes difficult to calculate prices, in real time, at all the nodes in the practical large size networks and further communicate them to the customers, while refreshing them at frequent intervals. To address this problem, a nodal price based network reduction technique has been proposed in this paper. Clusters of nodes in the network have been formed which have similar nodal prices and experience similar changes in nodal prices for different network conditions. Node clusters have then been reduced to equivalent nodes using REI network reduction technique. The reduced network has been shown to calculate nodal prices quite accurately in a considerably lesser time. The effectiveness of the proposed technique has been established on IEEE 118 bus test system.