Optimization of Economic Efficiency in Distribution Grids Using Distribution Locational Marginal Pricing

Distribution locational marginal pricing (DLMP) is an increasingly popular pricing signal that can be used to incentivize grid-friendly behavior of distributed energy resources (DER) to optimize economic efficiency in distribution grids. In this paper, a lossy direct-current optimal power flow (DCOPF) is utilized to obtain the iterative calculation framework for DLMPs. The two-stage algorithm iterates between the transmission system optimal power flow (OPF) and the distribution system OPF until no significant changes in DLMPs are observed. Real power losses are estimated using a static piecewise linear approximation technique. A sampling algorithm is proposed to minimize the possible convergence issues associated with the proposed mathematical model. DLMPs are calculated for the i) contemporary, ii) enhanced, and iii) meshed distribution grids using an IEEE 34-bus test feeder. The test transmission system is modeled using an IEEE 30-bus system. Finally, the calculated DLMPs in the enhanced grid are compared against three existing pricing mechanisms via three case studies to prove its validity and superiority, especially in congested systems with high penetration of price-responsive loads (PRLs).