Congestion Management in the Nordic Power Market — Counter Purchases and Zonal Pricing

Abstract

In this paper, we investigate methods for managing congestion on the grid in the Nordic power market. Specifically, we have considered the differences between using counter purchases as opposed to pricing out the transmission constraints of the grid. We show that the specific method used for congestion management greatly affects prices and therefore the surplus of the various agents, including the system operator. This means that the market agents may have preferences for one method, and take actions in order to influence which method is to be used. Based on this, we have studied the incentives and possibilities of “moving” capacity constraints, and the effect this has on system performance. We have also looked into the differences between various pricing schemes, i.e. optimal nodal prices versus optimal zonal prices. The effects that are demonstrated by the examples in this paper are especially relevant when designing coordination mechanisms and regulation for integrated markets, like the (emerging) European electricity market.

Peak Price Hours in the Nordic Power Market Winter 2009/2010: Effects of Pricing, Demand Elasticity and Transmission Capacities

“…The analysis to follow is performed using the models developed and presented in our previous research [2]. The models are based on a DC approximation of an Optimal Power Flow (OPF).…”

Two price zones for the German electricity market — Market implications and distributional effects

“…The possibility of a regular reassessment of bidding zones threatens a stable and predictable investment climate. Bjørndal et al (2003) also find the possibility of exercising market power. In addition, they show that a zonal design for the Nordic power market leads to completely different results regarding price, flows, congestion, and social surplus compared to a nodal approach.…”

A Nodal Pricing Model for the Nordic Electricity Market

“…In practice this might not be true, since the chosen method will affect prices, and hence the expected water values that are embedded in the bid curves. More detailed information about the model and discussion of the results from a number of hourly cases can be found in [3].…”

“…Thus, for Norway and Sweden we have constructed bid curves on the node level, to be described in more detail below. An extended description of the approach can be found in [3]. For the remaining Elspot bidding areas we have used the actual bid curves from Nord Pool Spot.…”

“…This is so due to the fact that the Nord Pool Spot bid curves only include a fraction of the actual load/production, 70-80 % on average. In order to evaluate the effects of different pricing methods on the power system in more detail we need to model the total load, covering (as close to) 100 % of the supply and demand in the Norwegian and Swedish areas 3 . In Table 2 we compare the actual Nord Pool Spot prices to the prices obtained from our model.…”