A Framework for Transmission Congestion Management Analysis

Transmission congestion has widespread impact on electricity markets. Of the various congestion management schemes the locational marginal prices (LMPs) based scheme have become the most widely used. The LMPs are used as the economic signals to allocate the limited transmission services. Financial transmission rights (FTR) are used to protect transmission customers from exposure to the uncertainties of the congestion prices. As such the congestion management problem involves complex interactions between the commodity market the transmission network and the financial markets for FTR. In this book we construct a framework that describes the characteristics of the three elements and their interactions. This framework can be utilized to solve various problems in the analysis and design of electricity markets. We design a new tool for the provision of nondiscriminatory transmission services to both the bilateral transactions and the pool players. We use the framework to quantify the substitutability of a generation addition and a transmission upgrade for congestion relief. We also apply the framework to the study of the FTR revenue adequacy and the design of secondary FTR markets.