Evaluation of cost based transmission pricing in Japan

We evaluated two major cost components of a transmission transaction: capital cost and line loss cost. We propose several methods of calculating supply costs based on the interconnection of independent power producers (IPPs), and confirm their effectiveness by a case study. This idea can be applied to the quantification of factors unrelated to cost such as demand site proximity when purchasing from IPPs. The Zero Counterflow Method and the Levelling Method are candidates for actual implementation. The costs of line loss are shown to be of the same order as the costs of transmission capacity, as determined by the Levelling Method. Examples using a Japanese electric power system illustrate several cost allocation methods for comparison.