Locational Marginal Price Variability at Distribution Level: A Regional Study

TL;DR

This study examines how locational marginal prices vary at the distribution level in a regional network, highlighting increased volatility under network constraints and implications for investors and generators.

Contribution

It provides a detailed analysis of LMP variability at distribution level under different network conditions, emphasizing the impact of constraints on price volatility.

Findings

Minimal spatial LMP variation in unconstrained networks

Significant increase in LMP volatility under constraints

Potential risks for generators and flexible demands

Abstract

As distribution systems move towards being more actively managed there is increased potential for regional markets and the application of locational marginal prices (LMPs) to capture spatial variation in the marginal cost of electricity at distribution level. However, with this increased network visibility can come increased price volatility and uncertainty to investors. This paper studies the variation in LMPs in a section of the south west of England distribution network for current and future installed capacity of distributed generation. It has been shown that in an unconstrained network, spatial LMP variation (due to losses) is minimal compared to the temporal variation. In a constrained network, a significant increase in LMP volatility was observed, both spatially and temporally. This could bring risk for generators particularly if they become stranded in low price areas, or flexible demands facing a drop-off in return when constraints are removed.