Market Power Under Nodal and Zonal Congestion Management Techniques

Endre Bjørndal (), Mette Bjørndal (), Linda Rud () and Somayeh Rahimi Alangi
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Endre Bjørndal: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Mette Bjørndal: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/mette-helene-bjorndal/
Linda Rud: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/linda-rud/

No 2017/14, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: Contrary to the common thought that nodal pricing provides more opportunities for a strategic player to exert market power than the zonal model, we show that in the latter one because of the need for re-dispatch or counter-trading, another extra place is created letting more gaming possibilities. Therefore, if proper market power mitigation approaches are not utilized in both day-ahead and re-dispatch markets, then zonal pricing may be more susceptible to market power, especially in zonal model which is based on available transfer capacity (ATC), strategic player's profit and social welfare can be very volatile. In general, the more network constraints are incorporated in day-ahead market (100% in nodal and almost zero in ATC), the more social welfare is attainable. Hence, nodal model is acquitted from the more market power denunciation.

Keywords: Market design; congestion management; available transfer capacity (ATC); market power; exibility cost of re-dispatch or counter-trading (search for similar items in EconPapers)
JEL-codes: C60 L10 L94 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2017-11-07
New Economics Papers: this item is included in nep-com and nep-reg
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Citations: View citations in EconPapers (2)

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