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Market-Based Redispatch May Result in an Inefficient Dispatch

Title data

Grimm, Veronika ; Martin, Alexander ; Sölch, Christian ; Weibelzahl, Martin ; Zöttl, Gregor:
Market-Based Redispatch May Result in an Inefficient Dispatch.
In: The Energy Journal. Vol. 43 (2022) Issue 5 . - pp. 205-230.
ISSN 1944-9089

Project information

Project title:
Project's official title
Project's id
Projektgruppe WI Energie und kritische Infrastrukturen
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Abstract in another language

In this paper we analyze a uniform price day-ahead electricity spot market that is followed by redispatch in the case of network congestion. We assume that the transmission system operator is incentivized to minimize redispatch cost and compare cost-based redispatch (CBR) to market-based redispatch (MBR) mechanisms. For networks with at least three nodes we show that in contrast to CBR, in the case of MBR incentives to minimize redispatch cost are in general not efficient in the context of our short-run analysis. This obtains both for pay-as-bid as well as locational marginal prices used for MBR compensation. As we demonstrate, moreover, in case of MBR the possibility of the transmission system operator to inefficiently reduce redispatch cost at the expense of decreased overall welfare can be driven both by the electricity supply side and the electricity demand side. Our results highlight a novel and important aspect regarding the design and the desirability of congestion management regimes in liberalized electricity markets.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Electricity Markets; Redispatch; Congestion Management; Computational Equilibrium Models
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Profile Fields > Emerging Fields > Energy Research and Energy Technology
Research Institutions
Research Institutions > Research Centres > Forschungszentrum für Modellbildung und Simulation (MODUS)
Research Institutions > Affiliated Institutes
Research Institutions > Affiliated Institutes > Fraunhofer Project Group Business and Information Systems Engineering
Research Institutions > Affiliated Institutes > FIM Research Center Finance & Information Management
Faculties > Faculty of Law, Business and Economics
Profile Fields
Profile Fields > Emerging Fields
Research Institutions > Research Centres
Result of work at the UBT: Yes
DDC Subjects: 000 Computer Science, information, general works > 004 Computer science
300 Social sciences > 330 Economics
Date Deposited: 03 Nov 2021 09:19
Last Modified: 19 Oct 2022 09:37