On transmission congestion and pricing

Abstract

We provide a tutorial review, by example, of how to calculate optimal bus prices and congestion costs for a simple power system, using the "DC" loadflow approximation. It is also shown how to calculate the marginal effect of changing the impedance of a transmission on total system costs, and how this can be used for transmission planning purposes. The role of long-term contracts for hedging and investment is discussed, and examples of hedging are given for various types of system participants.