Abstract: With the rapid growth of distributed generation （DG）， establishing a local power market will be a promising way to integrate DG and guarantee the optimal operation of distribution system. However， locational marginal pricing （LMP） for transmission network cant be applied to distribution network directly. This paper proposes a distribution locational marginal pricing （DLMP） model to clear the local electricity market where DGs bid in pool. The DLMP is decomposed into five components： marginal energy cost for active power and reactive power， marginal loss cost， marginal voltage support cost and marginal congestion cost， which quantify the contribution of each part to the total nodal price. Meanwhile， an iterative solution method is designed to obtain the DLMPs with high precision. Through the iterative calculations of market clearing model and AC power flow， the results obtained can overcome the dependence on the preset parameters （e.g. network loss factor） based on the historical operation information. Finally， simulation results on the IEEE 33-node distribution system demonstrate the effectiveness of the proposed model and accuracy of the proposed method.

Key words: distribution network, locational marginal pricing（DLMP）, distributed generation, power loss, AC power flow