From Nodal to Zonal Pricing - A Bottom-Up Approach to the Second-Best
Congestion 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.
|Date of creation:||21 Jul 2012|
|Date of revision:|
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- 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.
- Glenn Milligan & Martha Cooper, 1985. "An examination of procedures for determining the number of clusters in a data set," Psychometrika, Springer;The Psychometric Society, vol. 50(2), pages 159-179, June.
- 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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