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Inefficiencies in European congestion management proposals

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  • EHRENMANN, Andreas
  • SMEERS, Yves

Abstract

An efficient congestion management system is a necessary condition to remove obstacles to the cross border trade of electricity in Europe and hence to move towards an internal electricity market. Locational marginal pricing (LMP) is progressively becoming the benchmark of congestion management in the United States. It is conceptually simple, compatible with basic economic theory and physical realities, and effective in practice. Proposals for congestion management in Europe depart in several ways from this benchmark. We discuss these proposals and illustrate some of their inefficiences. A special emphasis is placed on the restrictions to trade implied by the implementation of zonal approaches.

Suggested Citation

  • EHRENMANN, Andreas & SMEERS, Yves, 2004. "Inefficiencies in European congestion management proposals," CORE Discussion Papers 2004090, Universit√© catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2004090
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    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-2004.html
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    References listed on IDEAS

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    1. Mette Bjorndal & Kurt Jornsten, 2001. "Zonal Pricing in a Deregulated Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 51-73.
    2. Richard Gilbert & Neuhoff, K. & Newbery, D., 2002. "Allocating Transmission to Mitigate Market Power in Electricity Networks," Cambridge Working Papers in Economics 0225, Faculty of Economics, University of Cambridge.
    3. Chao, Hung-Po & Peck, Stephen C, 1998. "Reliability Management in Competitive Electricity Markets," Journal of Regulatory Economics, Springer, vol. 14(2), pages 189-200, September.
    4. Andreas Ehrenmann & Karsten Neuhoff, 2009. "A Comparison of Electricity Market Designs in Networks," Operations Research, INFORMS, vol. 57(2), pages 274-286, April.
    5. Neuhoff, K., 2003. "Integrating Transmission and Energy Markets Mitigates Market Power," Cambridge Working Papers in Economics 0310, Faculty of Economics, University of Cambridge.
    6. Chao, Hung-po & Peck, Stephen & Oren, Shmuel & Wilson, Robert, 2000. "Flow-Based Transmission Rights and Congestion Management," The Electricity Journal, Elsevier, vol. 13(8), pages 38-58, October.
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    Cited by:

    1. Kristiansen, Tarjei, 2007. "An assessment of the Danish-German cross-border auctions," Energy Policy, Elsevier, vol. 35(6), pages 3369-3382, June.

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