Locational Marginal Pricing for Distribution Networks: Review and Applications

Abstract

Many distribution networks are operating based on uniform energy price rate for all the system nodes. However, with high penetration of distributed energy resources (DER), energy storage (ES) and flexible demands (FD), there is a big opportunity to optimally operate the distribution networks. In this context, distribution locational marginal pricing (DLMP) can be employed, similar to that of whole-sale electricity market, as the distribution pricing mechanism. The main advantage of DLPM that it can count for the network losses and congestion, so it can ensure a competitive and fair participation for all the entities, such as DERs and FDs, on the distribution side. With introduction of transactive energy system (TES) on wider scale in modern power systems, there will be a big necessity to adopt a robust pricing mechanism such as DLMP to consider both technical and economic concerns of distribution networks. In this paper, a brief review has been conducted on DLMP and its application. Further, an illustrative example is provided to demonstrate several attributes for the operation of distribution networks and its impacts on the DLMP values.