Congestion management in electricity networks (2015)

Wholesale electricity markets use different market designs to handle congestion in the transmission network. This paper compares nodal, zonal and discriminatory pricing in general networks with transmission constraints and loop flows. The conclusion is that the three market designs result in the same efficient dispatch in large games with many producers and certain information. 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.