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

Joachim Bertsch, Simeon Hagspiel and Lisa Just ()
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Joachim Bertsch: Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI), Postal: Vogelsanger Str. 321a, 50827 Koeln, Germany,
Simeon Hagspiel: Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)
Lisa Just: Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)

No 2015-3, EWI Working Papers from 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.

Keywords: power system economics; unbundling; congestion management; transmission pricing; inter-temporal equilibrium model (search for similar items in EconPapers)
JEL-codes: C61 C63 D47 E61 L50 Q40 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-06-09
New Economics Papers: this item is included in nep-cmp
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