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Congestion management in power systems - Long-term modeling framework and large-scale application

Author

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  • Bertsch, Joachim

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

  • Hagspiel, Simeon

    (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

  • Just, Lisa

    () (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))

Abstract

In liberalized power systems, generation and transmission services are unbundled, but remain tightly inter-linked. Congestion management in the transmission network is of crucial importance for the efficiency of these inter-linkages. Different regulatory designs have been suggested, analyzed and followed, such as uniform zonal pricing with redispatch or nodal pricing. However, the literature has either focused on the short-term efficiency of congestion management or specific issues of timing investments. In contrast, this paper presents a generalized and flexible economic modeling framework based on a decomposed inter-temporal equilibrium model including generation, transmission, as well as their inter-linkages. Short and long-term effects of different congestion management designs can hence be analyzed. Specifically, we are able to identify and isolate implicit frictions and sources of inefficiencies in the different regulatory designs, and to provide a comparative analysis including a benchmark against a first-best welfare-optimal result. To demonstrate the applicability of our framework, we calibrate and numerically solve our model for a detailed representation of the Central Western European (CWE) region, consisting of 70 nodes and 174 power lines. Analyzing six different congestion management designs until 2030, we show that compared to the first-best benchmark, i.e., nodal pricing, inefficiencies of up to 4.6% arise. Inefficiencies are mainly driven by the approach of determining cross-border capacities as well as the coordination of transmission system operators' activities.

Suggested Citation

  • Bertsch, Joachim & Hagspiel, Simeon & Just, Lisa, 2016. "Congestion management in power systems - Long-term modeling framework and large-scale application," EWI Working Papers 2015-3, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
  • Handle: RePEc:ris:ewikln:2015_003
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    power system economics; unbundling; congestion management; transmission pricing; inter-temporal equilibrium model;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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