Active/Reactive Locational Pricing in Distribution Networks

Electric power distribution systems are undergoing fundamental changes with the advent of distributed generation, microgrids, and proactive customers willing to exercise demand response. These new emerging phenomena create new challenges in operating distribution systems, leading to proposals calling for distribution system operators to be established to oversee the distribution system reliability, administer its operation, and serve as an interface between the resources at the distribution level with the wholesale market. The specific characteristics of distribution systems, such as low X/R ratio and radial or weakly meshed structure, necessitates special considerations when modelling their operation. This paper develops a model to operate the distribution system in a practical manner, considering voltage limitations, losses, and reactive power, to be used for marginal pricing at system nodes. A linearized power flow model is proposed and utilized to solve the distribution market operation problem, further helping the calculation of locational marginal prices and enabling sensitivity analysis with respect to losses, line congestion, and voltage limits.