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Comparison of congestion management techniques: Nodal, zonal and discriminatory pricing

Pär Holmberg and Ewa Lazarczyk

Year: 2015
Volume: Volume 36
Number: Number 2
DOI: 10.5547/01956574.36.2.7
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Abstract:
Wholesale electricity markets use different market designs to handle congestion in the transmission network. We compare nodal, zonal and discriminatory pricing in general networks with transmission constraints and loop flows. We conclude that in large games with many producers and certain information, the three market designs result in the same efficient dispatch. However, zonal pricing with counter-trading results in additional payments to producers in export-constrained nodes, which leads to inefficient investments in the long-run.



Electricity Tariff Rebalancing in Emerging Countries: The Efficiency-equity Tradeoff and Its Impact on Photovoltaic Distributed Generation

Pedro I. Hancevic, Hector M. Nuñez, and Juan Rosellón

Year: 2022
Volume: Volume 43
Number: Number 4
DOI: 10.5547/01956574.43.4.phan
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Abstract:
Existing tariff schemes often fail to achieve basic economic objectives. They set prices per unit that either exceed or fall short the social marginal cost and produce unfair distributional outcomes. In many cases, electricity rates also contribute to unsustainable fiscal deficits due to the (almost) generalized electricity subsidies. Moreover, inefficient residential tariffs do not favor the adoption of green technologies and the investment in energy efficiency improvements. We argue that the efficient deployment of green technologies, and more generally, the clean energy transition, will require electricity tariff reforms. In this paper, we use household level data and hourly industry data from Mexico to show how more efficient pricing mechanisms (such as a two-part tariff scheme in the context of efficient nodal pricing), combined with well-design environmental regulations (e.g., net-metering schemes) and correctly targeted transfer programs (e.g., means testing mechanisms) can improve economic, social, and environmental outcomes significantly, all at once.



One Price Fits All? On Inefficient Siting Incentives for Wind Power Expansion in Germany under Uniform Pricing

Lukas Schmidt and Jonas Zinke

Year: 2023
Volume: Volume 44
Number: Number 4
DOI: 10.5547/01956574.44.4.lsch
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Abstract:
This paper evaluates investment incentives for wind power under two market designs: uniform and nodal pricing. An electricity system model is developed, that allows for investments in wind power capacities while carefully accounting for static transmission grid constraints. Wind power capacities are assumed to reach the same expansion target by 2030 under both market designs. The results show that the introduction of nodal prices leads to investments in wind power plants shifting to locations with lower wind yield. The amount of electricity fed into the grid from wind power plants, however, is higher under nodal pricing as curtailment is reduced by two-thirds. Furthermore, grid-optimal wind locations are shown to require higher direct subsidy payments but decrease yearly variable supply costs by 1.5% in 2030. Yet distributional effects present an obstacle to the introduction of a nodal pricing regime, with about 75% of German demand facing an increase in electricity costs of about 5%. To mitigate the distorted investment signals arising from uniform pricing regimes, restricting investments within grid expansion areas proves to be more promising than including latitude-dependent generator-component in the grid tariff design.





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