Analysis of Network Rental in the Competitive Electricity Market

Competitive electricity markets use marginal prices to settle the transactions with generator owners and consumers. This results in charging the consumers more than the average cost of production of electricity due to the nonlinear relationship between the losses and power transmission. This difference in revenue collection, referred to as the network rental in this paper, is further increased if the dispatch is constrained due to any operating limits such as power flow limits. There are two main components that constitute the network rental, loss rental and the constraint rental. This paper presents a theoretical analysis based on Karush-Kuhn-Tucker (KKT) optimality conditions to calculate these different rental components. In this way each rental component can be quantitatively analyzed, which in turn can be used to get a better insight of the operation of the electricity market. Some case studies on the IEEE 30 bus system is presented to demonstrate the application of the proposed method.