ABSTRACT
This chapter provides a detailed introduction of nodal pricing and zonal pricing, which are major pricing methods in the electricity market. The optimal power flow (OPF)-based electricity market is presented mathematically. To consider security operations and N-1 contingency criteria, security-constrained optimal power flow (SCOPF)-based electricity market model is presented. Locational marginal prices (LMP) are derived from the mathematical model for the electricity market. The formulations of LMP and its energy, loss and congestion components are derived and presented mathematically for OPF-based market model and security-constrained market model, respectively. Examples are given to help readers understand the calculation of LMP. Examples are also provided to illustrate bilateral contract settlement, the spot market clearing, contract for difference (CfD), and congestion management. LMPs are calculated in the examples considering N-1 contingency security constraints for a power system and compared with the results without considering contingency constraints. In this chapter, the uniform price-based zonal pricing is also introduced and illustrated by figures. Zonal price-based market model and its congestion management are introduced. This chapter provides a complete description of electricity market pricing models and their mathematical representations, as well as the derivations of spot market prices. Market settlement and price calculations are illustrated in the examples.
