A pricing method for transmission loss based on sensitivity analysis

This paper presents a method to evaluate the economic value of transmission loss based on the share proportion principle and the sensitivity analysis. We first formulate an optimal power flow problem to derive the operation conditions, the nodal prices of each bus, and the transmission prices between two buses and then trace the transmission loss during operation based on the share proportion principle of the graph theory. The sensitivity analysis has been used to identify the wheeling path from each generator to any load, and the value of transmission loss is also evaluated. The proposed method is applied to the IEEE 30-bus standard system, which confirms our theoretical results. The proposed method can be used not only to improve the efficient usage of the power grid and congestion management but also to provide valuable economic signals for the generation or transmission investment.