Transmission embedded cost allocation using sensitivity analysis

The paper describes the principle and the implementation of a methodology to evaluate transmission network capacity use, for bilateral/multilateral transactions in an electricity pool, using sensitivity analysis on the pool dispatch model. In this methodology, transmission network capacity use is a function of the additional real power flow on transmission lines, due to the new transactions. This capacity use value provides a fast, accurate and equitable means of allocating transmission cost to the new transactions without performing new pool dispatch. An illustrative example on a 16-busbar system is used to show the implementation of the pricing methodology.