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Zonal Pricing, Transmission Constraints, and their Impact on Marginal Curtailment in a Future GB Electricity Market

Author

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  • Chyong, C. K.
  • Newbery, D.

Abstract

High Variable Renewable Electricity (VRE) penetration inevitably causes curtailment (shedding), normally measured by average curtailment. Marginal curtailment (mc, the fraction of potential output curtailed by the last MW) can be many times higher, raising the long-run marginal cost of investment, proportional to 1/(1-mc). A unit commitment and efficient dispatch model of Britain divided into seven zones by transmission constraints in 2030 demonstrates that these constraints considerably increase mc compared to no congestion despite the considerable expansion of transmission, interconnectors and storage that mitigate curtailment. Current auction design favours levelised costs ignoring curtailment, but long-run marginal costs may be 90% higher, arguing for careful locational planning.

Suggested Citation

  • Chyong, C. K. & Newbery, D., 2025. "Zonal Pricing, Transmission Constraints, and their Impact on Marginal Curtailment in a Future GB Electricity Market," Cambridge Working Papers in Economics 2581, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2581
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    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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