Implementing zonal pricing in distribution network: The concept of pricing equivalence

Abstract

Distribution locational marginal pricing (DLMP) is critical market mechanism to boost services from distributed energy resources (DER). This paper propose to design zonal pricing in distribution network according to the concept of pricing equivalence (PE). The rules of the zonal pricing are derived. We prove that equivalent load shift from demand response can be achieved by zonal pricing if pricing equivalence is deployed. Convex AC optimal power flow (OPF) is used to calculate zonal prices. The benefits of convex AC OPF are more accurate energy pricing and global optimization target. The responsive load with passive load controllers are modeled and solved in GAMS platform. Different zonal pricing approaches (PE, reference node and average of nodal prices) are compared. IEEE 14-bus network and two IEEE 13-node networks are connected to be an illustrative test case offering numerical results. The results show that zonal pricing designed according to PE can achieve the same load shift effects and quite close consumer payments as nodal pricing. PE outperform other zonal pricing approaches prominently in congested network situations.