A centrally optimised nodal market in which wholesale prices reflect marginal energy cost, transmission congestion and losses, supplemented by capacity and ancillary-service markets.
At a glance
A centrally optimised nodal market in which wholesale prices reflect marginal energy cost, transmission congestion and losses, supplemented by capacity and ancillary-service markets.
State of the debate
Architecture at a glance
Congestion is native to price formation: a central optimisation clears the network and produces a distinct price at every transmission node.
Generator & demand nodes
Network-constrained central optimisation
Central system optimisation · closed-loop dispatch
Nodal prices (LMPs)
Congestion embedded directly in nodal dispatch & prices
Rolling market coordination
Day-ahead + rolling interval clearing
Consumers & retailers
Transmission network only — distribution is not separately represented in this design
Supporting mechanisms
A high-level introduction to the market architecture.
PJM provides a mature reference implementation of nodal Locational Marginal Pricing.
Rather than assigning one wholesale price to a large geographic area, prices are calculated at individual transmission locations.
The locational marginal price represents the marginal consequence of serving additional electricity at a location while respecting transmission constraints.
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