Distribution network loss allocations with distributed generation using nodal prices

Abstract

We propose employing nodal factor pricing, a method associated with allocating losses at EHV transmission levels, for the allocation of loss costs at the distribution level. This method differs from traditional methods of averaging losses across customers regardless of location, time of use, or the marginal contribution of net power injection/withdrawal positions to losses. With respect to distributed generation (DG) resources, nodal prices provide more efficient price signals for dispatch and siting decisions. Moreover, nodal prices provide greater economic incentives for the deployment of DG by rewarding DG resources for contributions toward reducing losses at the margin through changed power flows. Nodal pricing factors are calculated using power flows locating “the reference bus” at the power supply point where the transmission network connects to the distribution network. We assume no network constraints at the distribution level. Finally, we conclude with an application of this method in a rural radial distribution network.