Comparative Distribution of System Losses to Market Participants using Different Loss Allocation Methods

A key part of electricity pricing is the fair and equitable allocation of system losses. This paper critically compares several existing loss allocation methods. The methods addressed include existing approaches such as pro rata method, proportional sharing method [1], loss formula [2], and incremental method [3], in addition to a new method proposed by the authors, which allocates losses from a loop-based representation of system behaviour. The distinct numerical allocation of losses in both the IEEE 14-bus network and a modified Nordic 41 bus system is listed for comparison. The similarity between the different loss allocations methods varies considerably, depending upon the system to which the methods are applied. This is primarily a result of the manner in which the different allocation methods address the impact of network structure. Further work is still required to determine which method encourages better system operation.