FTR Allocations to Ease Transition to Nodal Pricing: An Application to the German Power System

28 Pages Posted: 21 Oct 2014 Last revised: 22 Oct 2014

See all articles by Friedrich Kunz

Friedrich Kunz

German Institute for Economic Research (DIW Berlin)

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin)

Juan Rosellon

Centro de Investigacion y Docencia Economicas

Date Written: August 1, 2014

Abstract

A shift from zonal pricing to smaller zones and nodal pricing improves efficiency and security of system operation. Resulting price changes do however also shift profits and surplus between and across generation and load. As individual actorscan lose, they might oppose any reform. We explore how free allocation of financial transmission rights to generation and load can be used to mitigate the distributional impact. In a three node network we explore the fundamental effects with regard to reference node/hub for FTRs, the share of FTRs to be allocated for free and the metric to determine the proportion of rights allocated to different generation and load. We test the results in a more realistic setting based on hourly modelling of the German power system at nodal representation.

Keywords: Electricity market, financial transmission right, congestion management, market design, Germany

JEL Classification: L52, L94, Q40, D47

Suggested Citation

Kunz, Friedrich and Neuhoff, Karsten and Rosellon, Juan, FTR Allocations to Ease Transition to Nodal Pricing: An Application to the German Power System (August 1, 2014). DIW Berlin Discussion Paper No. 1418, Available at SSRN: https://ssrn.com/abstract=2512191 or http://dx.doi.org/10.2139/ssrn.2512191

Friedrich Kunz (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Karsten Neuhoff

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

Juan Rosellon

Centro de Investigacion y Docencia Economicas ( email )

Carretera Mexico Toluca 3655
01210 Mexico, D.F.
Mexico

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
34
Abstract Views
639
PlumX Metrics