Lecture 11 – Advanced Pricing in the Smart Grid: Spatial Price Discrimination

Question 1

What is nodal pricing?

Answer 1

Local price component for each node in a network based on current network status

Question 2

Why is a local price component needed?

Answer 2

Exogenous, non-local price signals, coupled with flexible demand, can induce massive load peaks (load avalanches). To avoid local load avalanches we need a local price component.

Question 3

What is the problem with nodal pricing?

Answer 3

− While node-level pricing (e.g. for each house individually) may yield the theoretical optimum allocation it may both be intractable and likely not accepted by customers
− Individually pricing a certain area, e.g. a given distribution grid or transformer substation, seems more plausible

Question 4

What does zonal pricing do?

Answer 4

Zonal pricing aims at controlling the local aggregate load by modifying the local electricity price accordingly