Bidding Zone Review (ENTSO-E)
European Energy Market is a zonal market – it means that the energy is being traded inside and between regions, called zones. Historically, zonal borders follow the political ones, which introduces a lot of inefficiencies into the market. The question is: is the current zonal structure optimal and, if not, what is the optimal zonal delimitation for Europe? By solving such a puzzle we approach a mathematical problem of clustering the power system’s nodes. Identified clusters of nodes are expected to form new zones.
Each alternative zonal structure has to be roust over time (in years or decades) and based on solid numerical arguments. Zonal borders affect market solution and thus – the economic welfare of the area under the analysis. Examination of the zonal design needs to be performed by simulating market outcomes achieved under the assumption of particular delimitations.
Two independent methods have been invented, implemented and applied in order to solve the problem. Firstly, the clustering of Locational Marginal Prices has been brought to the next level by introducing Consensus Clustering approach. Above that, a novel method, based on Power Transfer Distribution Factors, has been developed and utilized to achieve the solution coherent with grid-based justification of grouping nodes of power gird.
Both methods have been presented and published to the international community of electrical engineers and Transmission System Operators.