Comparison of Pricing Schemes of Several Deregulated Electricity Markets in the World

As the power system is deregulated, transmission congestion management in an open access environment is a new challenge to transmission operators. Improper implementation of congestion management (CM) can impose a major barrier to competitive electricity trading. Therefore, system operators should provide market participants with an appropriate and efficient CM procedure. In addition, the associated pricing mechanism based on the allocation of congestion payments should provide a clear ´economic signal´ to market participants. Since power industry started to deregulation in the world, each restructuring market has proposed its CM procedure and pricing mechanism based on its particular network characteristic. These mechanisms should be investigated and compared. The analysis results would help market designers improve their CM operation procedures and provide a better pricing approach that can provide a more reasonable economic indicator for generation resource allocation. This paper reviews the congestion management (CM) schemes and the associated pricing mechanisms utilized by four main electricity markets: the old UK Pool, Nordic Pool, Northeast American markets (PJM, ISO-NE, ISO-NY), and the UK NETA system. An eight-bus system is provided to help illustrate the operations of CM and the corresponding pricing mechanism in the four transmission market structures. Finally, a comparative analysis in the four representative pricing schemes has been studied in this paper so as to assess their efficiencies, and the effectiveness of the market pricing signals