Zonal Pricing, Transmission Constraints, and their Impact on Marginal Curtailment in a Future GB Electricity Market

Chi Kong Chyong and David Newbery

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: High Variable Renewable Electricity (VRE) penetration inevitably causes curtailment (shedding), normally measured by average curtailment. Marginal curtailment (mc, the fraction of potential output curtailed by the last MW) can be many times higher, raising the long-run marginal cost of investment, proportional to 1/(1-mc). A unit commitment and efficient dispatch model of Britain divided into seven zones by transmission constraints in 2030 demonstrates that these constraints considerably increase mc compared to no congestion despite the considerable expansion of transmission, interconnectors and storage that mitigate curtailment. Current auction design favours levelised costs ignoring curtailment, but long-run marginal costs may be 90% higher, arguing for careful locational planning.

Keywords: Variable Renewable Electricity; Marginal Curtailment; Average Curtailment; Levelised Cost of Electricity; VRE Support Design (search for similar items in EconPapers)
JEL-codes: L94 Q28 Q42 Q48 (search for similar items in EconPapers)
Date: 2025-10-09
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