From Nodal to Zonal Pricing - A Bottom-Up Approach to the Second-Best
AbstractCongestion management schemes have taken a prominent place in current electricity market design discussions. In this paper, the implications of establishing zonal pricing in Europe are analyzed with regard to potential zonal delimitations and associated effects on total system costs. Thereby, a nodal model sets the benchmark for efficiency and provides high-resolution input data for a cluster analysis based on Ward’s minimum variance method. The proposed zonal configurations are tested for sensitivity to the number of zones and structural changes in the electricity market. Furthermore, dispatch and redispatch costs are computed to assess the costs of electricity generation and transmission. The results highlight that suitable bidding zones are not bound to national borders and that losses in static efficiency resulting from the aggregation of nodes into zones are relatively small.
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Bibliographic InfoPaper provided by Energiewirtschaftliches Institut an der Universitaet zu Koeln in its series EWI Working Papers with number 2012-9.
Length: 29 pages
Date of creation: 21 Jul 2012
Date of revision:
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Cluster Analysis; Electricity Market Modeling; Nodal Pricing; Redispatch; Zonal Pricing;
Find related papers by JEL classification:
- C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
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- Glenn Milligan & Martha Cooper, 1985. "An examination of procedures for determining the number of clusters in a data set," Psychometrika, Springer, vol. 50(2), pages 159-179, June.
- Leuthold, Florian & Weigt, Hannes & von Hirschhausen, Christian, 2008. "Efficient pricing for European electricity networks - The theory of nodal pricing applied to feeding-in wind in Germany," Utilities Policy, Elsevier, vol. 16(4), pages 284-291, December.
- 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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