Long-Term Distribution Network Pricing and Planning to Facilitate Efficient Power Distribution

Abstract

Distribution network pricing plays an important role in maximising the economic benefits of providing the network services to both the utilities and other market participants. It is essential in providing economic signals to serve two key purposes:

• to incentivise efficient utilisations of existing distribution facilities;
• to guide the siting of future generation and demand.

Many pricing methodologies have been developed since the late 80’s. In the UK, the distribution reinforcement model (DRM) has been the foundation for the distribution tariff setting since its introduction. However, DRM is deemed inefficient in providing locational economic signals, especially when the contribution of distributed generation (DG) is getting more significant. Hence, two other economic pricing methodologies, long-run incremental cost (LRIC) pricing and forward cost pricing (FCP) methodologies, were developed to resolve the drawbacks of DRM. The LRIC pricing model is the most advanced pricing model to date that is capable of reflecting both the ’distance’ and the degree of utilisation of the network assets. On the other hand, the FCP approach provides limited economic signals as it groups nodes to a network group, where the nodes have the same charges.

This work focused on improving the basic LRIC pricing methodology to provide efficient economic signals to the network users. This basic LRIC pricing methodology, however, has some major issues that are preventing its practical deployment. The issues addressed in this work includes:

• determiningthe networkassets’ maximum capacity margin to withstand credible contingencies
• determining the network assets’ reinforcement time horizon due to their evaluated circuit loading growth rates
• determining the final tariffs through revenue reconciliation

The LRIC pricing methodology is then assessed by comparing its pricing signals with those of the FCP methodology. In addition, the long-term impact or benefits of the three pricing methodologies implemented or going to be implemented in the UK are assessed by measuring their efficiency through a 20-year study that involves customer responses and network planning.

Date of Award	1 Oct 2010
Original language	English
Awarding Institution	University of Bath
Supervisor	Furong Li (Supervisor)