Time of Use Pricing of Electricity in an Electric Power System with Non Commercial Power Plants

Abstract

Time of Use Pricing of Electricity (TOUP) has improved load factors of power systems in various countries. Theories of TOUP that maximize social welfare have been developed. In Japan, however, there are many non commercial power plants (NCP) that are made and used for the sake of owner's profit, not social welfare. How the optimal TOUP changes when effects of these NCPs exist in power systems is discussed here.
When formulating NCPs parameters, it is necessary to consider the difference of each NCP's cost. Not all NCPs cost equally, because the conditions of plants, such as heat demands, are unique. We first analized how much cost of NCPs differ using the data of prices and NCP ratio in Japanese 9 utilities. We analized next how customers with NCPs make their plants and use them. It is found that NCPs generate the same amount of power throughout the entire period when the difference of peak and offpeak prices are small, and not the same when it is large. Finally we discussed how utilities should set their prices to maximize the social welfare, considering NCPs and their revenue neutral constraints. If there is revenue neutral condition, the difference of prices must be larger when considering NCPs, than without considering NCPs.