Alternative loss model for the New Zealand electricity market using SFT

The New Zealand Electricity Market (NZEM) is a locational marginal price (LMP) market. The market clearing engine, called Scheduling Pricing and Dispatch (SPD), is based on security constrained DC OPF and is formulated as a Linear programming problem (LPP). There are significant differences between how SPD calculates the LMPs at each node and those calculated in many other LMP markets. In the NZEM, the LMP which is the dual variable associated with power balance equality constraint captures three cost components readily available in the SPD solution. These three components are marginal cost of generation, marginal cost of losses and the marginal cost of network congestion. SPD currently uses a piece-wise linear loss model to capture the losses of each branch. This has a number of advantages as well as a number of potential disadvantages. The objective of this paper is to present a sound mathematical framework for developing an alternative loss model using the interaction between SPD and a newly introduced market tool called “Simultaneous Feasibility Test” (SFT). The main thrust is that the loss model should be free from non-physical losses and other problems encountered in the piece-wise linear loss model currently in use.