Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Market Power Under Nodal and Zonal Congestion Management Techniques
(), Mette Bjørndal
(), Linda Rud
() and Somayeh Rahimi Alangi
Abstract: Contrary to the common thought that nodal pricing provides
more opportunities for a strategic player to exert market power than the
zonal model, we show that in the latter one because of the need for
re-dispatch or counter-trading, another extra place is created letting more
gaming possibilities. Therefore, if proper market power mitigation
approaches are not utilized in both day-ahead and re-dispatch markets, then
zonal pricing may be more susceptible to market power, especially in zonal
model which is based on available transfer capacity (ATC), strategic
player's profit and social welfare can be very volatile. In general, the
more network constraints are incorporated in day-ahead market (100% in
nodal and almost zero in ATC), the more social welfare is attainable.
Hence, nodal model is acquitted from the more market power denunciation.
Keywords: Market design; congestion management; available transfer capacity (ATC); market power; exibility cost of re-dispatch or counter-trading; (follow links to similar papers)
JEL-Codes: C60; L10; L94; (follow links to similar papers)
17 pages, November 7, 2017
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