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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.

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  • 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. Bert Willems, 2002. "Modeling Cournot Competition in an Electricity Market with Transmission Constraints," The Energy Journal, , vol. 23(3), pages 95-125, July.
    2. 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. Pär Holmberg, 2025. "The inc-dec game and how to mitigate it," Working Papers EPRG2501, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    2. Mario Blazquez Paz, 2024. "Production or transmission investments? A comparative analysis," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 51(4), pages 957-1000, December.
    3. 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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