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Comparison of Congestion Management Techniques: Nodal, Zonal and Discriminatory Pricing

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  • Par Holmberg
  • Ewa Lazarczyk

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 and certain information, the three market designs result in the same efficient dispatch. However, zonal pricing with countertrading results in additional payments to producers in export-constrained nodes, which leads to inefficient investments in the long-run.

Suggested Citation

  • Par Holmberg & Ewa Lazarczyk, 2015. "Comparison of Congestion Management Techniques: Nodal, Zonal and Discriminatory Pricing," The Energy Journal, , vol. 36(2), pages 145-166, April.
    • Handle: RePEc:sae:enejou:v:36:y:2015:i:2:p:145-166
    DOI: 10.5547/01956574.36.2.7
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    References listed on IDEAS

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    1. Richard Green, 2007. "Nodal pricing of electricity: how much does it cost to get it wrong?," Journal of Regulatory Economics, Springer, vol. 31(2), pages 125-149, April.
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    Cited by:

    1. Holmberg, Pär, 2024. "The Inc-Dec Game and How to Mitigate It," Working Paper Series 1512, Research Institute of Industrial Economics.

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