From Nodal to Zonal Pricing - A Bottom-Up Approach to the Second-Best

Barbara Burstedde
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Barbara Burstedde: Energiewirtschaftliches Institut an der Universitaet zu Koeln

No 2012-9, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

Abstract: 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.

Keywords: Cluster Analysis; Electricity Market Modeling; Nodal Pricing; Redispatch; Zonal Pricing (search for similar items in EconPapers)
JEL-codes: C38 C63 L51 Q41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2012-07-21
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:ewikln:2012_009

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