This paper addresses the issue of transmission loss charging. The classical, theoretically-optimal, marginal charging for losses is compared with the tracing-based methodology. It is shown that tracing can be seen as a compromise between flat postage stamp and marginal pricing. The latter sends theoretically optimal, very strong, locational signals but suffers from volatility, and non-transparency. By contrast the tracing-based pricing sends a weaker locational signal but is more market-friendly as the prices are stable and transparent. The paper also reviews the results of a simulation study conducted on the transmission system of England and Wales. It is shown that locational signals provided by both methodologies are closely correlated as the correlation coefficient is 0.9 for the zonal generator charges and 0.5 for the zonal load charges. However the marginal charges are more widely spread while the tracing-based charges are much flatter. Finally application of the tracing methodology for the transmission pricing of cross-border trades is discussed.
|Number of pages||5|
|Publication status||Published - 2002|
|Event||UPEC 2002, 37th International Universities' Power Engineering Conference - Stafford, United Kingdom|
Duration: 9 Sep 2002 → 11 Sep 2002
|Conference||UPEC 2002, 37th International Universities' Power Engineering Conference|
|Period||9/09/02 → 11/09/02|