Abstract
The zonal method of pricing in the real-time energy markets may cause grid reliability problems, which in turn will cause high-energy cost. As a result an alternative approach was sought for a more cost effective and reliable outcome -nodal pricing. Nodal pricing is a better model from an engineering perspective and can model all constraints. The physical system constraints consist of unit commitment, ramp, thermal, voltage, and dynamic. Nodal pricing is slightly more difficult to understand, however the prices reflect actual conditions, therefore the outcome would have a higher degree of accuracy.
The research will compare, discuss, and analyze various experiences using the -zonal and nodal pricing model. Optimum Power Flow (OPF) is the technology that will be used in the simulation. The theory around OPF is how to find an optimum solution to a non-linear problem where the total costs are minimized.
The result of this research will give insight to the optimal pricing method for the real time energy market. The pricing methodology determines not only the price at which suppliers are paid, but also prices at which consumers are charged. The real time energy market in California is a multi-billion dollar market and the pricing model can make a significant impact on the location of new supply.