Market Coupling as the Universal Algorithm to Assess Zonal Divisions

TL;DR

This paper proposes a universal algorithm to evaluate and compare different zonal divisions in electricity markets based on social welfare, utilizing Market Coupling and extended LMP methodologies that account for weather variability.

Contribution

It introduces a flexible assessment method for zonal divisions that can incorporate various methodologies beyond LMP, enhancing market design evaluation.

Findings

Market Coupling effectively assesses social welfare across divisions.

Extended LMP methodology accounts for weather variability.

The approach is adaptable to different zonal division methods.

Abstract

Adopting a zonal structure of electricity market requires specification of zones' borders. In this paper we use social welfare as the measure to assess quality of various zonal divisions. The social welfare is calculated by Market Coupling algorithm. The analyzed divisions are found by the usage of extended Locational Marginal Prices (LMP) methodology presented in paper [1], which takes into account variable weather conditions. The offered method of assessment of a proposed division of market into zones is however not limited to LMP approach but can evaluate the social welfare of divisions obtained by any methodology.