Economic efficiency of transmission pricing for cross-border trades: Marginal versus tracing-based pricing

J. W. Bialek, S. Ziemianek

Research output: Contribution to conferencePaperpeer-review

2 Citations (Scopus)

Abstract

This paper addresses the issue of transmission loss charging. The classical, theoretically-optimal, marginal charging for losses is compared with the tracing-based methodology. It is shown that tracing can be seen as a compromise between flat postage stamp and marginal pricing. The latter sends theoretically optimal, very strong, locational signals but suffers from volatility, and non-transparency. By contrast the tracing-based pricing sends a weaker locational signal but is more market-friendly as the prices are stable and transparent. The paper also reviews the results of a simulation study conducted on the transmission system of England and Wales. It is shown that locational signals provided by both methodologies are closely correlated as the correlation coefficient is 0.9 for the zonal generator charges and 0.5 for the zonal load charges. However the marginal charges are more widely spread while the tracing-based charges are much flatter. Finally application of the tracing methodology for the transmission pricing of cross-border trades is discussed.

Original languageEnglish
Pages539-543
Number of pages5
Publication statusPublished - 2002
Externally publishedYes
EventUPEC 2002, 37th International Universities' Power Engineering Conference - Stafford, United Kingdom
Duration: 9 Sep 200211 Sep 2002

Conference

ConferenceUPEC 2002, 37th International Universities' Power Engineering Conference
Country/TerritoryUnited Kingdom
CityStafford
Period9/09/0211/09/02

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