AC Network Loss-Embedded LMP with SOCP: A Non-Iterative Approach

Network losses, a byproduct of energy trading, have been shown to have a significant impact on local marginal pricing (LMP). Errors in the marginal pricing of network losses have the potential to generate misleading market incentives. In contrast to the linear LMP based on loss factors, this paper recovers a fully second-order cone programming (SOCP) analytical formulation of network loss using AC optimal power flow (OPF). This approach ensures that the AC network loss is naturally embedded as the convex constraint in the optimal clearing procedure instead of successively approximating loss factors via the current linearized operating point. As a result, our approach circumvents the convergence problem. Furthermore, following the Karush-Kuhn-Tucker (KKT) conditions, we re-derive the LMP formulation of the nodal power balance equations to fully integrate the energy price and the loss price. Finally, the efficacy of the proposed approach is substantiated through rigorous validation in test systems of different scales.