Session 8

Question 1

What’s LMP?

Answer 1

Locational marginal pricing, also called nodal pricing:
Different prices at each network bus bars.

Question 2

Characteristics of uniform vs zonal vs nodal pricing

Answer 2

Uniform pricing:
- Wholesale el. price is the same across the entire market at any moment in time
- price reflects the costs and constraints of generation

Zonal pricing:
- The market is split into a number of regions with stable delimitations
- Within each such “bidding zone”, the price is uniform and trade is unconstrained
- between zones, trade is limited and prices may diverge
- transmission constraints within zones are addressed by out-of-the-market measures

Nodal pricing (LMP):
- Each substation is its own bidding zone
- every node becomes a abidding zone, every line an interconnector, every trade XB trade
- prices reflect the costs and constraints of generation and transmission

Question 3

What do electricity networks consist of?

Answer 3

• Nodes (busbars in substations)
• lines (overhead lines or cables)
• generators
• consumers (possibly through distribution grid)

Question 4

Two laws of Kirchhoff

Answer 4

1. Current law: Total current or charge entering a node is exactly equal to the charge leaving the node as it has no other place to go except to leave, as no charge is lost within the node.

2. Voltage law: In any closed loop network, the total voltage around the loop is equal to the sum of all the voltage drops within the same loop (which is equal to zero)

Question 5

“DC load flow” model
(Where’s electricity flowing in a closed circuit?)

Answer 5

Electricity from A to B will take all possible pathways.

The distribution of flow is inverse to the resistance (i.e. more resistance = less flow)

Question 6

What’s a PTDF matrix?

Answer 6

The PTDF matrix shows marginal impact of additional generation on line flows. It depends on network topology only.

E.g.: 3 MW through a triangled system (three lines) from A to B: 2 MW will go straight and 1 MW will take the detour through two lines. Depicting this in a table is a PTDF matrix.

Question 7

How can the system operator change flows? Example: triangled network with three lines

Answer 7

1. Impact flows directly:
   - phase-shifting transformers
2. Change topology (disconnect a line)
   - switching operations
   - no cost
   - reduced redundancy, increased losses
3. Redispatch
   - Change generation / load pattern

Question 8

Price determination:

Price at a node is determined as…

Answer 8

• increase in total system cost if one additional MWh is consumed at this node.
• marginal benefit for total system if an additional MWh is fed into this node

Question 9

Properties of nodal prices (5)

Answer 9

1. LMPs can have properties that seem to defeat economic intuition (the consequence of the physics of power flow)

2. LMPs can be lower or higher than the var. cost of any generator:
Higher: If consuming 1 additional MWh requires increasing the output of a high-cost generator by more than one MWh
Lower: If consuming one additional MWh allows increasing the output of a low-cost gneerator by more than one MWh

3. LMPs can be lower or higher than the zonal (copperplate) price (see above)

4. Power can flow from a high-price node to low-price node

5. Prices reflect not only costs & scarcity of generation but also cost & scarcity of transmission