An optimization model for investigating the trade-offs between efficient spatial pricing of electricity and renewable energy

摘要

this paper investigates the importance of implementing efficient forms of spatial pricing and their possible effects on generation technologies and the performance and regulation of the electricity market, with particular reference to renewable energy in the British electricity system. For over twenty years economists have known how to calculate the optimal spatial pricing for electricity, known as nodal (or locational marginal) pricing. However, such knowledge appears to have been ignored by the designers of most electricity markets. More importantly it has been suggested that there may be a conflict between the implementation of adequate locational signals and the development of renewable energy because the former may lead to higher network charges which may compromise the profitability (and therefore the feasibility) of renewable energy plants. Thus this paper develops a tool for investigating how various forms of spatial pricing (including nodal pricing) may affect different generation technologies, with regards to both investment and operating decisions. In particular this article focuses on the British case, where it is alleged that the introduction of more efficient spatial pricing might compromise the development of generation technologies located in particular areas, such as renewable technologies, especially on-shore wind farms in the north of the country.