Nodal energy spot prices induce a least-cost dispatch in a competitive market. But it is clear that most of the country will not, at least initially, adopt nodal pricing. There is an alternative approach which might also lead to optimal pricing. In this approach scarce transmission resources are priced explicitly instead of implicitly through nodal energy price differences. Pricing transmission congestion explicitly requires a new set of prices and an extra market, but it may have advantages. Unfortunately, there is still no completely specified system of explicit congestion pricing with the efficiency properties of nodal pricing, but this article brings us a step closer to that goal. Several schemes for explicit congestion pricing are already on the table, including proposals by Chao and Peck, IndeGO, and CCEM.(1) Each of these makes a contribution, but none describes a pricing system with the coherence of nodal pricing.
In PWP-055, Stoft demonstrates the simplicity of Chao-Peck (CP) prices
but also suggests a substitute for their complex market mechanism that
greatly simplifies life for the average power trader. Stoft shows that
CP prices can be easily extended to CP+Hub prices which provide a complete
nodal energy spot market. Even including the hub price, there are fewer
CP+Hub prices than zonal prices in networks that can be successfully zoned.
Finally Stoft argues that, although the necessary market mechanism has
not been fully developed, there is reason to hope that this task is manageable.
Stoft also takes note of the progress that NERC has made in developing
the calculating engine that is the necessary basis for such a market.