A Structural Transmission Cost Allocation Scheme Based on Capacity Usage Identification

In liberalized electricity markets, it is essential and of great importance to develop a fair transmission cost allocation scheme that is able to reflect the “extent of use” of the transmission facilities as much as possible. In this paper, the transmission capacity is divided into four components: capacity used in normal conditions (CN), capacity reserved for contingencies (CC), capacity reserved for future use (CF) and invalid capacity (IC). CN and CC are determined by the power flow in the normal and contingency conditions of the system operation snapshot, respectively. The CF is determined by the maximum power flow in contingency conditions over a certain period (say yearly). The cost corresponding to IC would not be allocated to network users. Based on capacity usage identification, differential cost allocation methods are designed according to the functions of the transmission capacity. The cost corresponding to the capacity usage of the transmission asset under normal and contingency conditions is allocated separately. Case studies in a 3-bus system and the IEEE 30-bus system validate the good performance of the proposed structural transmission cost allocation scheme.