Long-Run Incremental Cost Pricing for Improving Voltage Profiles of Distribution Networks in a Deregulated Environment

  • Edwin Matlotse

Student thesis: Doctoral ThesisPhD


Electricity network pricing approaches play a fundamental role in establishing whether providing the network service function is economically beneficial to both the network operators and other stakeholders, namely, network users. Many pricing methodologies have been developed since the late 80‟s. The earlier approaches were not based on economic principle while the latest are directed to being more based on economic principle as the shift is towards deregulated and privatized electric power industry as opposed to the earlier vertically regulated regime. As a result, many such methodologies based on economic principle have emerged and these reflect the investment cost incurred in circuits and transformers to support real and reactive power flow. However, to reflect investment cost incurred for maintaining network voltages in network charges has received very little attention in network charges. Therefore, this research work is aimed to create a charging approach to recover investment cost, by the network operator, for maintaining the network voltages. This thesis presents a new long-run incremental cost (LRIC) pricing approach for distribution networks and demonstrates the course of action of evaluating and allocating the network asset cost in the context of maintaining network voltages. Also, it should be noted that this approach can be used for transmission networks. Firstly, the LRIC-voltage network pricing approach for reflecting the future network VAr compensation assets is proposed. Then, this approach is extended to consider n-1 contingency situation as per statutory requirement that the network should be able to withstand such contingencies in order to enhance reasonable security and reliability in its network. Lastly, this LRIC-voltage network charging methodology is again extended to reflect the charges for existing network VAr compensation assets. In addition, this LRIC-voltage network pricing approach is improved to reflect better the nodal charges as the respective nodal voltage degradation rates, given corresponding load growth rate, are determined based on the P-V curve concept. The advantages of all these incorporate the ability to reflect correct forward-looking charges, to recognize both real and reactive powers, to provide locational charges and to provide charges for both generation and demand customers. In addition, two fundamental studies were conducted to demonstrate the trend in which the LRIC-voltage network charges would follow given different networks and different load growth rates. What set apart the LRIC-voltage network charges are those two parameters. Moreover, with regard to different networks, this was a defining moment as to how the aforementioned charges should be sought given transmission and distribution networks. A pricing software package utilizing load-flow has been developed implementing the proposed LRIC-voltage network pricing methodology and, its extensions. This software can well be utilized by transmission and distribution companies for analyzing their cost. The LRIC-voltage network pricing methodology and its extensions, are all demonstrated on the IEEE 14-bus test system and a practical distribution test network in the South Wales area of England, UK.
Date of Award1 Sept 2010
Original languageEnglish
Awarding Institution
  • University of Bath
SupervisorFurong Li (Supervisor)


  • long-run incremental cost for improving distribution network voltage profiles

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