A novel incremental network loss algorithm based on the dynamic power flow is proposed. The unbalance component of active power is taken into the power flow model in order to take full consideration of the regulation characteristics of generators in real power grids. Then the inversion of the transposed Jacobian matrix is performed to obtain all the generators’ nodal incremental network loss accurately, which can handle the unsolvable problem in the transposed jacobian matrix method because there is no active power constraints in the slack buses. Numerical results for several test systems demonstrate the effectiveness of the proposed algorithm and the advantage in economic dispatch for active power.