Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study
Electricity markets are transitioning to zonal and nodal pricing to maximize social welfare, improve price signals, and enhance congestion management. South Korea, traditionally reliant on uniform pricing, is evaluating this transition but lacks a detailed impact analysis. This study assessed the im...
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2025-01-01
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| author | Kyuhyeong Kwag Hansol Shin Hyobin Oh Hyeongseok Yun Hyojeong Yoon Wook Kim |
| author_facet | Kyuhyeong Kwag Hansol Shin Hyobin Oh Hyeongseok Yun Hyojeong Yoon Wook Kim |
| author_sort | Kyuhyeong Kwag |
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| description | Electricity markets are transitioning to zonal and nodal pricing to maximize social welfare, improve price signals, and enhance congestion management. South Korea, traditionally reliant on uniform pricing, is evaluating this transition but lacks a detailed impact analysis. This study assessed the impacts of various zonal and nodal pricing schemes on power systems and provided policy implications for this transition. We (1) modeled the power system at various levels of granularity, obtaining a detailed 4579-node representation; (2) constructed a set of zonal and nodal pricing schemes reflecting changes in market-clearing models and pricing mechanisms; and (3) performed quantitative analyses through simulations for each scheme. Under the current system marginal price (SMP)-based uniform pricing, the schemes with the least market impact are SMP-based zonal pricing with two bidding zones and extended locational marginal pricing. These results can guide the development of an appropriate pricing transition pathway, although a market price reduction of 4.8–7.0% appears inevitable. Within the Korean electricity market, wherein a Transco is a monopoly retailer, we identified potential conflicts of interest for the Transco in zonal and nodal pricing. By focusing on South Korea, this study offers valuable insights into any electricity market considering the transition to zonal and nodal pricing. |
| format | Article |
| id | doaj-art-0605554d65804dc98c841a1036ff3421 |
| institution | Kabale University |
| issn | 2076-3417 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | MDPI AG |
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| series | Applied Sciences |
| spelling | doaj-art-0605554d65804dc98c841a1036ff34212025-01-24T13:20:34ZengMDPI AGApplied Sciences2076-34172025-01-0115271610.3390/app15020716Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case StudyKyuhyeong Kwag0Hansol Shin1Hyobin Oh2Hyeongseok Yun3Hyojeong Yoon4Wook Kim5Department of Electrical and Electronics Engineering, Pusan National University, 2, Busandaehak-ro 63beon-gil, Geumjeong-gu, Busan 46241, Republic of KoreaThe Lantau Group, 4-102, 14, Teheran-ro 26-gil, Gangnam-gu, Seoul 06236, Republic of KoreaDepartment of Electrical and Electronics Engineering, Pusan National University, 2, Busandaehak-ro 63beon-gil, Geumjeong-gu, Busan 46241, Republic of KoreaDepartment of Electrical and Electronics Engineering, Pusan National University, 2, Busandaehak-ro 63beon-gil, Geumjeong-gu, Busan 46241, Republic of KoreaDepartment of Electrical and Electronics Engineering, Pusan National University, 2, Busandaehak-ro 63beon-gil, Geumjeong-gu, Busan 46241, Republic of KoreaDepartment of Electrical and Electronics Engineering, Pusan National University, 2, Busandaehak-ro 63beon-gil, Geumjeong-gu, Busan 46241, Republic of KoreaElectricity markets are transitioning to zonal and nodal pricing to maximize social welfare, improve price signals, and enhance congestion management. South Korea, traditionally reliant on uniform pricing, is evaluating this transition but lacks a detailed impact analysis. This study assessed the impacts of various zonal and nodal pricing schemes on power systems and provided policy implications for this transition. We (1) modeled the power system at various levels of granularity, obtaining a detailed 4579-node representation; (2) constructed a set of zonal and nodal pricing schemes reflecting changes in market-clearing models and pricing mechanisms; and (3) performed quantitative analyses through simulations for each scheme. Under the current system marginal price (SMP)-based uniform pricing, the schemes with the least market impact are SMP-based zonal pricing with two bidding zones and extended locational marginal pricing. These results can guide the development of an appropriate pricing transition pathway, although a market price reduction of 4.8–7.0% appears inevitable. Within the Korean electricity market, wherein a Transco is a monopoly retailer, we identified potential conflicts of interest for the Transco in zonal and nodal pricing. By focusing on South Korea, this study offers valuable insights into any electricity market considering the transition to zonal and nodal pricing.https://www.mdpi.com/2076-3417/15/2/716electricity market designextended locational marginal price (ELMP)locational marginal price (LMP)nodal pricingsystem marginal price (SMP)zonal pricing |
| spellingShingle | Kyuhyeong Kwag Hansol Shin Hyobin Oh Hyeongseok Yun Hyojeong Yoon Wook Kim Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study Applied Sciences electricity market design extended locational marginal price (ELMP) locational marginal price (LMP) nodal pricing system marginal price (SMP) zonal pricing |
| title | Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study |
| title_full | Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study |
| title_fullStr | Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study |
| title_full_unstemmed | Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study |
| title_short | Quantifying the Impact and Policy Implications of Transitioning to Zonal and Nodal Pricing in the Electricity Market: A South Korean Case Study |
| title_sort | quantifying the impact and policy implications of transitioning to zonal and nodal pricing in the electricity market a south korean case study |
| topic | electricity market design extended locational marginal price (ELMP) locational marginal price (LMP) nodal pricing system marginal price (SMP) zonal pricing |
| url | https://www.mdpi.com/2076-3417/15/2/716 |
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