Comparison of Congestion Management Techniques: Nodal, Zonal and Discriminatory Pricing

Wholesale electricity markets use different market designs to handle congestion in the transmission network. We compare nodal, zonal and discriminatory pricing in general networks with transmission constraints and loop flows. We conclude that in large games with many producers and certain information, the three market designs result in the same efficient dispatch. However, zonal pricing with countertrading results in additional payments to producers in export-constrained nodes, which leads to inefficient investments in the long-run.