Analysis of linear loss models — A New Zealand perspective

The New Zealand Electricity Market (NZEM) is a locational marginal price (LMP) market. The market clearing engine, called Scheduling Pricing and Dispatch (SPD), is based on security constrained DC OPF and is formulated as a Linear programming problem (LPP). There are significant differences between how SPD calculates the LMPs at each node and those calculated in many other LMP markets. In the NZEM, the LMP which is the dual variable associated with power balance equality constraint captures all three cost components readily available in the SPD solution. These three components are marginal cost of generation, marginal cost of losses and the marginal cost of network congestion. SPD currently uses a piece-wise linear loss model to capture the losses of each branch. The objective of this paper is to present difference in losses with the number of linear loss segments, and highlight the problems encountered by such models.