Independent Power Producer Locality Effect on Wheeling Cost

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The need for more efficient generation and provision of electric power has led the setting of electric power industry to change quickly from its regulated conventional setup to a deregulated one, in several countries, traditionally under the control of federal and state governments. One of the important aspects of the policies liberalized by the Indian government in 1990s is the opening of power generation to private sector that has resulted in the entry of Independent Power Producers (IPPs) into power generation field. IPPs make use of third-party owned transmission network to “wheel” the electrical energy to its customers. The wheeling party is paid ‘Wheeling cost’ annually for its service as well as for meeting the losses. This paper introduces the concept of wheeling, summarizes different types of embedded wheeling cost methodologies and gives a detailed presentation of an ‘embedded’ wheeling cost methodology namely ‘MVA-km’ method to determine the annual wheeling cost. The wheeling cost is calculated by the MVA-km method and compared by changing the location of seller, to an application example illustrated.
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Wheeling; Transmission Transaction; Independent Power Producers; Embedded Cost; Wheeling Cost

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