Redispatch in Zonal Pricing Electricity Markets

Mario Blázquez de Paz ()
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Mario Blázquez de Paz: the Norwegian University of Science and Technology, Trondheim, Postal: and Research Institute of Industrial Economics,, Box 55665, SE-102 15 Stockholm, Sweden

No 1278, Working Paper Series from Research Institute of Industrial Economics

Abstract: Zonal pricing electricity markets operate sequentially. First, the suppliers compete in a spot market. Second, to alleviate the congestion in the transmission line, in a redispatch market, the suppliers in the importing node are called into operation to increase their production, and the suppliers in the exporting node are compensated to reduce their production. I characterize the equilibrium in a zonal market when the competition is imperfect and the spot and redispatch markets operate sequentially. I also work out the equilibrium when the transmission line is taken into account in the spot market, i.e., it is not necessary to introduce a redispatch market to alleviate the congestion in the transmission line. I find that the consumers' welfare and suppliers' profits depend crucially on the type of redispatch design implemented by the auctioneer, and that could introduce long term investment distortions.

Keywords: Electricity auctions; Redispatch design; Transmission constraint; Zonal pricing electricity markets (search for similar items in EconPapers)
JEL-codes: D43 D44 L13 L94 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2019-05-20
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
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