Abstract: This paper constructs a benefit compensation model for maximizing the total power output of cascade hydropower stations using an improved progress optimality algorithm (POA) coupled with discrete differential dynamic programming (DDDP) and considering loss in diversion flow. The algorithm uses water stage combination of the cascade reservoirs as a basic calculation unit in solving for compensation benefit on the basis of quantifying the impact of water diversion on the power output. We calculate the electricity price of the leading hydropower station under different power returns of the benefited stations using the feed-in tariff of operation period, and develop a power generation benefit compensation method of combining electricity price and output. The mechanism of corresponding benefit compensation for the leading station is demonstrated. Application to the cascade stations in the Wu River basin shows that our method is effective in quantitative analysis of the diversion flow and its impact on the power output of the cascade stations and in calculations of the compensation benefit of the leading station. The method can also be used to resolve conflicts over the benefits of upper and lower stages of the cascade.

Key words: cascade hydropower stations, optimized operation, leading hydropower station, loss in diversion flow, mechanism of electricity price, benefit compensation based on electricity price and output