LRIC Charging with a Fixed Reinforcement Period for
Different Growth Rate
Furong Li
University of Bath
Overview
• Issues with LRIC with different growth rates – lower growth rates tend to have higher charges when the circuit utilisation is close to its rated capacity
• LRIC with a fixed time horizon
Key Issue
Marginal Cost for Different Growth Rate
-£10,000
£0
£10,000
£20,000
£30,000
£40,000
£50,000
£60,000
£70,000
0 0.2 0.4 0.6 0.8 1
Util%
Mar
gina
l Cos
t (£/
MW
/yr)
0.50% 1.60% 3.00% 5.00%
45MW rating
£3,193,400 asset cost
6.9% discount rate
1MW increment
LRIC Pricing Model
• Translate each circuit’s spare capacity into the time horizon to reinforcement at underlying load growth
• Transfer the spare capacity into present value of reinforcement Cost of reinforcement will be a function of asset cost and circuit utilisation
• Marginal pricing signal from increase in PV of future reinforcement as the result of an injection of load or generation
+ 1 MW
After
Before
LRIC• 1.6% growth rate at 2% circuit utilisation:
• 5% growth rate at 2% circuit utilisation:
Present
Present 78 yrs (reinforcement)
FC240 = £3,193,400PV = £0.36
PV = £17538
240 yrs (reinforcement)
FC78 = £3,193,400
45MW rating
£3,193,400 asset cost
6.9% discount rate
1MW increment
Investment horizon for different circuit utilisation@ 1.6% load growth rate
0%
20%
40%
60%
80%
100%
120%
0 50 100 150 200 250 300
Number of years
Per
cen
tag
e o
f u
tili
sati
on
2%
11%
22%
44%
67%
89%
98%
100%
Investment horizon for differing circuit utilisationand differing load growth rates
0%
20%
40%
60%
80%
100%
120%
0 50 100 150 200 250 300
Number of years
Per
cen
tag
e o
f u
tili
sati
on
2%
11%
22%
44%
67%
89%
98%
100%
LRIC
Util=100% Utilint=50% Util=100% Utilint=50% Util=100%
Once a circuit reaches its full capacity, an additional circuit will be added, the circuits utilisation would drop to 50%. The time take (T) for the circuits to grow from 50% to 100%:at 1.6% circuit growth rate T=44yrat 5% circuit growth rate T=14 yrs
Investment for a fixed investment horizon of 100yr @ 1.6% load growth rate
0
0.2
0.4
0.6
0.8
1
1.2
0 20 40 60 80 100
Number of years
Per
cen
tag
e o
f u
tili
sati
on
2%
11%
22%
44%
67%
89%
98%
100%
Investment for a fixed investment horizon of 100yr @ 5% load growth rate
0%
20%
40%
60%
80%
100%
120%
0 20 40 60 80 100
Number of years
Per
cen
tag
e o
f u
tili
sati
on
2%
11%
22%
44%
67%
89%
98%
100%
LRIC charges with 100yr fixed horizon
0
5000
10000
15000
20000
25000
30000
2% 11% 22% 44% 67% 89% 98% 100%
Percentage of utilisation
£/M
W/y
r
1.6% grow th rate 5% grow th rate
LRIC charges with 40 yr fixed horizon
0
5000
10000
15000
20000
25000
30000
2% 11% 22% 44% 67% 89% 98% 100%
Percentage of utilisation
£/M
W/y
r
1.6% growth rate 5% growth rate
Future investment costs and their PVs
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
7.42 51.09 94.75
Number of years to reinforce (Circuit utilised at 90%, growth rate at 1.6%)
Annuitised dPVs (Circuit utilised at 90%, growth rate at 1.6%)
0
50,000
100,000
150,000
200,000
250,000
0 5 10 15 20 25 30 35 40
Number of years to pay back
1st reinforcement 2nd reinfrocement 3nd reinforcement
Conclusions
• LRIC considering one rather than a stream of future reinforcement introduces some distortion to the network cost
• The distortion is negligible for circuits with low load growth rates
• For high load growth rates at high circuit utilisation, the distortion can be significantly reduced by considering a few more future reinforcement