How Compatible is Perfect Competition with Transmission Loss Allocation Methods?

Jing Dai (), Yannick Phulpin (), Vincent Rious and Damien Ernst ()
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Jing Dai: SUPELEC-Campus Gif - Ecole Supérieure d'Electricité - SUPELEC (FRANCE)
Yannick Phulpin: SUPELEC-Campus Gif - Ecole Supérieure d'Electricité - SUPELEC (FRANCE)
Vincent Rious: SUPELEC-Campus Gif - Ecole Supérieure d'Electricité - SUPELEC (FRANCE)
Damien Ernst: ULiège - Université de Liège = University of Liège = Universiteit van Luik = Universität Lüttich

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Abstract: This paper addresses the problem of transmission loss allocation in a power system where the generators, the demands and the system operator are independent. We suppose that the transmission losses are exclusively charged to the generators, which are willing to adopt a perfectly competitive behavior. In this context, their offers must reflect their production costs and their transmission loss costs, the latter being unknown beforehand and having to be predicted. We assume in this paper that the generators predict their loss costs from the past observations by using a weighted average of their past allocated costs. Under those assumptions, we simulate the market dynamics for different types of transmission loss allocation methods. The results show that the transmission loss allocation scheme can lead to a poorly efficient market in terms of social welfare.

Keywords: Transmission loss allocation; agent-based simulation; market efficiency; electricity market (search for similar items in EconPapers)
Date: 2008-05-28
Note: View the original document on HAL open archive server: https://centralesupelec.hal.science/hal-00300388v1
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Published in European Electricity Market 2008, May 2008, Lisbonne, Portugal. 6 p

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