An iterative LMP calculation method considering loss distributions

Generally, the locational marginal price (LMP) is obtained by solving a linear programming formulation. Network losses are considered through the preset loss factors based on historical operation information. This usually brings errors in the calculated loss under different new scenarios. Further, the congestion component of an LMP is dependent on the choice of the reference bus. In this paper, a new iterative LMP calculation method is proposed to overcome the aforementioned two drawbacks associated with the traditional LMP calculations. At each iteration, a linear programming problem for market clearing is solved first. Losses on branches are considered as fictitious nodal demands at their terminal buses. Secondly, the AC power flow is calculated according to the dispatch results. Loss factors and fictitious nodal demands are then updated according to the AC power flow solution, thus removing the need and dependence on presetting loss factors. Another important merit is that LMP and its congestion component obtained from the proposed iterative LMP calculation method are independent of choice of the reference bus. The effectiveness of the proposed method is illustrated on two benchmark systems. The importance of obtaining accurate losses and LMPs is also demonstrated.