Evaluation of Modeling Differences of Nodal vs. Zonal Pricing Based Electricity Markets: Optimization Models and Network Representation

Abstract

Firstly, this work briefly introduces the Collaborative Doctoral Program (CDP), which fosters collaborations between the Joint Research Centre and Universities, in order to provide a European qualification framework to doctoral students, who are trained to be at the intersect of science and policy through multinational projects. Secondly, this work provides an example of research conducted in the context of the CDP in the field of energy modeling aiming at developing improved modeling tools to assess the efficiency of nodal against zonal pricing and providing evidence for policy-makers. The electricity system is evolving with increasing incorporation of renewable energies, therefore also the transmission system is facing expanding challenges. As a consequence, also electricity markets are evolving. A topic of increasing interest is nodal pricing as an alternative to zonal pricing-based electricity markets in Europe. This work is giving an overview of different formulations of optimization problems in power systems and in particular, in electricity markets, which are commonly applied in literature. We focus on two different aspects being the type of optimization problem and the representation of the transmission network. In this context, the trade-off between modeling accuracy and computational efforts is the topic assessed in this study. We find that computational times increase drastically when employing unit-commitment, but remain rather moderate when sticking to economic dispatch using DC- as well as AC-OPF. The representation of networks in terms of aggregated node systems, which are relevant when aiming to compare zonal to nodal pricing-based electricity markets, show that power flows within zones are difficult to predict and it is vital to further investigate the aggregation of nodes into zones to support comparative studies.