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Zonal Pricing in a Deregulated Electricity Market

Mette Bjorndal and Kurt Jornsten

Year: 2001
Volume: Volume22
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No1-3
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Abstract:
In the deregulated Norwegian electricity market a zonal transmission pricing system is used to cope with network capacity problems. In this paper we illustrate some of the problems with the zonal pricing system as it is implemented in Norway. Using small network examples we illustrate the difficulties involved in defining the zones, the redistribution effects of the surplus that a zonal pricing system has, as well as the conflicting interests concerning zone boundaries that are present among the various market participants. We also show that a zone allocation mechanism based on nodal prices does not necessarily lead to a zone system with maximal social surplus. Finally, we formulate an optimization model that when solved yields the zone system that maximizes social surplus given a pre-specification of the number of zones to be used.



Modeling Optimal Economic Dispatch and System Effects in Natural Gas Networks

Kjetil T. Midthun, Mette Bjorndal and Asgeir Tomasgard

Year: 2009
Volume: Volume 30
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No4-6
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Abstract:
In this paper we present a modeling framework for analyzing natural gas markets, taking into account the specific technological issues of gas transportation. We model the optimal dispatch of supply and demand in natural gas networks, with different objective functions, i.e., maximization of flow, and different economic surpluses. The models take into account the physical structure of the transportation networks, and examine the implications it has for economic analysis. More specifically, pressure constraints create system effects, and thus, changes in one part of the system may require significant changes elsewhere. The proposed network flow model for natural gas takes into account pressure drops and system effects when representing network flows. Pressure drops and pipeline flows are modeled by the Weymouth equation. A linearization of the Weymouth equation makes economic analyses computationally feasible even for large networks. However, in this paper, the importance of combining economics with a model for pressure drops and system effects is illustrated by small numerical examples.





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