Locational Marginal Pricing (LMP) in Deregulated Electricity Market

The deregulation of electricity markets has a very large impact on almost all the power systems around the world. Competitive markets are complex systems with many participants who buy and sell electricity. Much of the complexity arises from the limitations of the underlying transmission systems and the fact that supply and demand must be in balance at all times. Generally the Locational marginal pricing (LMP) is obtained by solving a linear programming formulation. Network losses are considered through the preset loss factor based on historical operational information. This usually brings error in the calculated loss under different new scenarios. In this paper a new iterative LMP calculation method is proposed to overcome the aforementioned drawbacks associated with the traditional LMP calculations. At each iteration, a linear programming problem for market clearing is solved first .Losses on branches are considered as fictitious nodal demand at their terminal buses .Secondly the AC power flow calculated according to the dispatch results. Loss factors and fictitious nodal demand are then updated according to the AC power flow solution. The effectiveness of the proposed method is illustrated on PJM 5 bus Keywords-AC power flow,active power loss,congestion,locational marginal pricing,power market,reference bus