Analysis of transmission-embedded cost allocation schemes in open electricity markets

Article type: Research Article

Authors: Yu, C W | Wong, Y K

Affiliations: Department of Electrical Engineering The Hong Kong Polytechnic University Hung Hom, Kowloon, Hong Kong

Abstract: Transmission services have to be provided as a separate item in a deregulated or vertically restructured electricity supply industry. Methods for transmission line fixed-cost allocation among the transmission transactions accounting for line capacity use are presented. Cost allocation to each transaction will be according to the capacity use patterns throughout an accounting period in an equitable manner. The allocation problem is approached from the point of view of a cooperative game theory. This paper presents four allocation schemes, namely, the MW-mile method, individual-cost method, nucleolus method, and Shapley value method for equitable allocation of transmission network fixed-cost recovery. Desired properties of cost allocation schemes are discussed. The pros and cons of these allocation schemes and their fulfilment of the desired properties are investigated and compared.

DOI: 10.3233/RED-120025

Journal: Journal of Resources, Energy and Development, vol. 3, no. 1, pp. 1-11, 2006