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Fix the energy market
Draft

PJM-style Locational Marginal Pricing

A centrally optimised nodal market in which wholesale prices reflect marginal energy cost, transmission congestion and losses, supplemented by capacity and ancillary-service markets.

Solution section

Energy Pricing & Dispatch

How electricity is traded, dispatched and priced.

Energy Pricing & Dispatch

A simplified central dispatch problem is:

min⁡P∑iCi(Pi)\min_P \sum_i C_i(P_i)

subject to power balance:

∑iPi=∑jDj\sum_i P_i = \sum_j D_j

and transmission constraints:

−Fℓmax≤Fℓ(P,D)≤Fℓmax.-F_\ell^{max} \leq F_\ell(P,D) \leq F_\ell^{max}.

A simplified nodal price decomposition is:

LMPn=λenergy+λcongestion,n+λloss,n.LMP_n = \lambda_{energy} + \lambda_{congestion,n} + \lambda_{loss,n}.

The resulting wholesale price varies by transmission location.