A bottleneck-free bidding zone configuration approach qualification

Nodal or zonal price signals are generated in a power network based on prevailing market philosophies. In nodal pricing regime, prices are derived at each injection or withdrawal node. These prices will vary across the network based on congestion and losses in the network. In financial market context, network is considered to be lossless. Thus, occurrence of congestion in the network creates different prices for electricity transactions. This is known as bottleneck issue. However, in zonal pricing regime, the complete network is present as a single zone in the absence of any bottleneck. In practice, market splitting takes place in presence of bottlenecks in the network. This is an attribute of power market that has been adopted in decentralized market clearing practice, the example of which are Indian power market and Nordic pool. The market splitting is done based on pre-specified zones that are fictitious and formed based on regulator's experience. These zones are termed as copper plate in which all players are treated on par as they are connected to a single bus having a single price for buying and selling of power. It is expected that players enjoy enough market liquidity and risk hedging to play freely within a zone to have perfect competition. In India, these zones are formed based on geographical and political boundaries. This might bring the players who are non-contributors of congestion into the wing of high price zone. This creates an issue of fairness. This paper proposes a methodology to solve network segmentation problem in wholesale competition environment so that appropriate bid areas are formed. A two-step process is proposed. Firstly, an optimization based zone formation of nodes with closeness as a decision index is done. Secondly, a fine adjustment on the results of the first step by bus migration process is done. The proposed method is implemented on modified Indian power network consisting of 193 buses, 452 branches and 52 generators. It is observed that a clear-cut and practically implementable bidding zones are formed using this method.