Spot Pricing of Electricity Market with Network Structure Composed of Consumers, Suppliers, and Transmission Companies

Abstract

In this paper, we propose a spot pricing method of an electrical network composed of consumers,suppliers, and transmission companies. The electricity pricing is formulated as a maximization problem of the sum of consumers surplus and profits of suppliers and transmission companies. If there exists a solution to the maximization problem, it is the unique solution for a system of differential algebraic equations with boundary conditions. A numerical simulation demonstrates that an electricity market consisting of two areas is designed to reduce the areal difference of electricity prices.