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Long-run incremental cost pricing based on unused capacity


Reference:

Li, F.-R. and Tolley, D. L., 2007. Long-run incremental cost pricing based on unused capacity. Power Systems, IEEE Transactions on, 22 (4), pp. 1683-1689.

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Official URL:

http://dx.doi.org/10.1109/TPWRS.2007.908469

Abstract

This paper proposes a novel approach for providing long-run incremental cost (LRIC) pricing in network charges. The proposed approach makes use of the unused capacity of an exiting network to reflect the cost of advancing or deferring future investment consequent upon the addition of generation or load at each study node on a distribution network. Compared with existing approaches to LRIC pricing, the proposed approach produces forward-looking charges that reflect both the extent of the network needed to service the generation or load, and the degree to which that network is utilized. The efficacy of the proposed LRIC approach has been validated by a comparison with the established investment cost related pricing (ICRP) method used for deriving transmission charges in Great Brain (GB). This paper draws on work undertaken in projects for Western Power Distribution and Ofgem (Office of Gas and Electricity Markets, U.K.). However, the views expressed in this paper are those of the authors.

Details

Item Type Articles
CreatorsLi, F.-R.and Tolley, D. L.
DOI10.1109/TPWRS.2007.908469
Uncontrolled Keywordswestern power distribution, power system economics, deferring future investment, long-run incremental cost pricing, investment, great britain, office of gas and electricity markets, pricing, equilibrium, unused capacity, distribution networks, transmission charges, incremental cost pricing, network charges
DepartmentsFaculty of Engineering & Design > Electronic & Electrical Engineering
RefereedYes
StatusPublished
ID Code5717

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