Reliability-Based Distribution Network Pricing

As a tool for network operators to recover network investment costs from network users as well as to provide forward-looking economic signals, distribution network pricing models are also expected to identify and recover investment costs related to maintaining network security. The existing models reflect network security by determining the maximum allowed contingency flow along each component through implementing deterministic contingency analysis. They fail to consider two reliability cost drivers: 1) reliability levels of network components, and 2) interruption tolerance levels at different nodes. For the first time, this paper proposes a novel distribution network pricing model to reflect two key reliability cost drivers: 1) the nodal unreliability tolerance mandated by security standards, which is linked to the customer size at the node, and 2) the stochastic nature of component reliability that reflects differing failure rates of network components. By combining the two factors, the new reliability-based pricing model is able to recognize the impact on network investment from network components' reliability in addition to their distance and the degree of utilization. The concept is firstly demonstrated on three small networks: a single circuit system, a parallel-circuit system, and a meshed system. The applicability of the new pricing approach to practical systems is then illustrated on a practical distribution network in the U.K. system.