Marginal Loss Modeling in LMP Calculation

This paper discusses the pricing of marginal transmission network losses in the locational marginal pricing approach recently deployed in the ISO New England (ISO-NE) standard market design (SMD) project implemented by ALSTOM's T&D Energy Automation and Information (EAI) Business. The traditional loss model is studied and a new model is proposed. The new model achieves more defendable and predictable market-clearing results by introducing loss distribution factors to explicitly balance the consumed losses in the lossless dc power system model. The distributed market slack reference is also introduced and discussed. The LMP components produced by the two models are studied and compared under changes in slack reference. Numerical examples are presented to further compare the two models.