Distribution loss allocation methods assessment under electricity market environment

Under real-time or day-ahead pool-based electricity markets, the implementation of the distribution loss allocation procedures implies an access-pricing framework based on half- hour or hour locational prices. For each consumer and distributed generator it is required to apply an additional charge in the energy price in order to cover the cost of active losses. Since every allocation procedure modifies the locational prices in a different way, the initial market equilibrium point is altered and some form of cross-subsidies appears among market agents affecting the net social welfare and the network remuneration. The regulator should address the economical impact of each allocation method in order to ensure a non-discriminatory access to the network and guarantee revenue reconciliation of losses. This paper contributes to regulator assessment introducing a novel analysis of the impact of each loss allocation procedure based on the social welfare theory and explicitly considering the price elasticity of demand. The methodology was tested in two distribution test systems.