Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Nodal Pricing in a Coupled Electricity Market
(), Mette Bjørndal
() and Hong Cai
Abstract: This paper investigates a pricing model for an electricity
market with a hybrid congestion management method, i.e. part of the system
applies a nodal pricing scheme and the rest applies a zonal pricing scheme.
The model clears the zonal and nodal pricing areas simultaneously. The
nodal pricing area is affected by the changes in the zonal pricing area
since it is directly connected to the zonal pricing area by commercial
trading. The model is tested on a 13-node power system. Within the area
that is applying nodal pricing, prices and surpluses given by the hybrid
pricing model match well with those given by the full nodal pricing model.
Part of the network is better utilized compared to the solutions given by
the full zonal pricing model. However, the prices given by the hybrid
system may send wrong economic signals which triggers unnecessary
generation from existing capacities, exacerbates grid congestion, and
induces higher re-dispatching costs.
Keywords: Congestion Management; Nodal Pricing; Zonal Pricing; Electricity Market; (follow links to similar papers)
JEL-Codes: Q00; (follow links to similar papers)
6 pages, June 26, 2014
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