Benefits from coordinating congestion management—The Nordic power market

We consider the possibility of improving the utilization of the capacity of the Nordic transmission grid, by improving on the methods for congestion management. We use a simplified model of the Nordic power market, and different load-scenarios are developed in order to illustrate the effects. By improving the coordination of the system operator function, we may achieve that the actual bottlenecks, both as regards to the location and capacity, form the basis for the definition of price areas. This may result in a better partition of the grid, not necessarily following the borders between the control areas of today's system operators. We also consider solving intra zonal bottlenecks “directly”, through the area prices and “indirectly” by “moving” internal capacity constraints to the borders between price areas. The examples illustrate that this “indirect” congestion management may be costly, and result in larger price differences than necessary.