Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 915: Congestion Management in Electricity Networks: Nodal, Zonal and Discriminatory Pricing

Pär Holmberg () and Ewa Lazarczyk ()
Additional contact information
Pär Holmberg: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Ewa Lazarczyk: Research Institute of Industrial Economics (IFN), Postal: and Stockholm School of Economics

Abstract: Wholesale electricity markets use different market designs to handle congestion in the transmission network. We compare nodal, zonal and discriminatory pricing in general networks with transmission constraints and loop flows. We conclude that in large games with many producers who are allowed to participate in the real-time market the three market designs result in the same efficient dispatch. However, zonal pricing with counter-trading results in additional payments to producers in export-constrained nodes.

Keywords: Congestion management; Wholesale electricity market; Transmission network; Nodal pricing; Zonal pricing with countertrading; Discriminatory pricing; Large game

JEL-codes: C72; D44; D61; L13; L94

32 pages, April 20, 2012

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