Network Cost Loss Allocation Methods Evaluation under the Perspective of the Social Welfare Theory

Abstract

Different ex-post methodologies have been proposed to allocate network losses. Under day-ahead pool-based electricity markets, the implementation of these procedures implies an access-pricing framework based on half-hour or hourly locational prices. Since every allocation procedure modifies the locational prices in a different way, the initial market equilibrium point is altered as a result of the price elasticity of demand. This implies that some form of cross-subsidy appears among market agents, affecting economic variables as social welfare and network remuneration. This paper aims to contribute to the regulatory assessment by means of an analysis based on the social welfare theory in order to ensure a non-discriminatory access to the network. A base scenario is obtained through an optimal power flow study with the purpose of simulating an efficient energy market, and four allocation philosophies have been considered: incremental, roll-in-embedded, tracing based and cir