The effect of dynamic security constraints on the locational marginal prices

In a restructured power system, locational marginal prices (LMP) are important pricing signals to the participants. LMP at a given node of a power system is the incremental cost of supplying power at that node. In a lossless system with no active constraints, the LMPs at all the nodes are equal. However, due to the losses in the power system, the LMPs at different nodes is different. Any operating constraint such as line flow limits also contribute to the LMP at a node. This paper investigates the effect of a dynamic security constraint on the LMPs. The transient stability margin expressed as a function of nodal voltages and phase angles, is used as a constraint in an optimal power flow (OPF) program to determine the LMPs at all the nodes of a power system. The Lagrange multiplier associated with the transient stability constraint gives the marginal cost of the transient stability constraint. A case study on the New England 39 bus system is presented to demonstrate the effect of the dynamic security constraint on the LMPs. In a nodal pricing scheme, any active constraint results in an additional revenue to the system operator. This revenue, known as the network rental, is also investigated in the paper.