Dynamic Pricing and Area-Time Specific Marginal Capacity Cost for Distribution Investment Deferment

Electricity deregulation makes it more feasible to apply differential rates across customers. Dynamic prices can be used to reflect the changes in marginal energy costs of a power system. Some dynamic pricing pilot projects reveal that dynamic prices can actually reduce or shift electricity usage. However, system-load peaks and local-area load peaks could occur at different times. When both peaks are coincident, two objectives can be achieved simultaneously by applying dynamic pricing: total system demand and local demand reduction. However, when these peaks are non-coincident, local demand requires investment. We propose and extended dynamic pricing scheme by taking area-and time-specific marginal distribution capacity costs into account for addressing locational investment deferral. Elasticity model which uses actual test data from pilot projects is adopted to estimate load reduction due to dynamic pricing.