2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004)April 2004 Hong Kong
* Combination of two methods for congestion
management
M. Lommerdal, and L. Soder, Member, IEEE
Abstract-This article describes an approach for
modeling a combination of two congestion management
methods. A method has been developed to study the effects
on increased market trading capacity from counter
trading in markets that combine market splitting and
counter trading. Case studies have been simulated, and the
result has been analyzed. The focus is on what economic
impact these methods have on the behavior of various
actors in a re-regulated power market.
Index Terms - Interconnected power systems
I. INTRODUCTION
C ONGESTION management have always been an issue for
the operator of an electrical network. Re-regulation of
power markets all around the world sets new criteria for
handling this problem. With re-regulation a number of new
possibilities were enabled for the market actors, however they
all require a well-organized power market in order to be able
to work in the market. In a competitive market place, prices
are set for the power based on aggregated bids and offers from
all participants. Most competitive power markets use a
periodically based contract system, giving each time period its
special price, usually they consists of a single country or parts
of a country, even though exchange can take place with
neighboring countries. The Nordpool market with the four
countries Denmark, Finland, Norway and Sweden, is the only
competitive truly international power market. In that market,
additional services such as risk management tools and
regulating power can be found close to or integrated in the
market. Nordpool is described as the most competitive market
worldwide [ 11.
In markets with market splitting congestion could lead to
price differences in areas, which could jeopardize an actor's
financial undertakings. Another undesirable effect is an
increased risk of market manipulation.
A common European market are under discussion and some
research papers address this issues, e.g. cost-allocation for
cross-border-flows[2], in a similar way as this paper, however
This work was supported in part by the Elforsk AB and the Swedish
Energy Agency.
M. Lommerdal is with Royal Institute of Technology, Department of
Electrical Engineering, Electrical Power Systems, Teknikringen 33, S- 100 44
Stockholm, SWEDEN (e-mail: magius. LommL.rdal~,ilkc.l;tli.sc)
L. Soder is with Royal Institute of Technology, Department of Electrical
Engineering, Electrical Power Systems, Tehikringen 33, S- 100 44
Stockholm, SWEDEN (e-mail: lennart.soder@eke.kth.sc)
0-7803-8237-4/04/$17.0002004IEEE
140
without the aspect of congestion management.
Congestion management has been discussed in many
research papers the last years [3];[4], methods and approaches
have been carefully investigated. However; the impact of
combining different methods for congestion management has
not been addressed. Previous research on an advanced
international market as Nordpool revealed that several
methods are used to manage congestion in the same
market[5]. Market based and non-market based methods
where found side by side. With this result in mind it is clear
that there is a need of widen the research to also include
combination of methods.
In this paper a method is developed which can be used for
simulation of combination of two congestion management
methods for market with zonal pricing and periodically based
contract system. The result concerning the impact on different
actors is then analyzed.
11. CONGESTION MANAGEMENT
All electrical networks used in a re-regulated or regulated
market environments will face congestion in different
situations. Ideally, congestion management methods will
allow market actors to make maximum use of the network and
at the same time maintain system security. To achieve that,
several methods have been developed and are currently used
in electrical network all around the world today. The choice of
congestion management method (CMM) is closely related to
the market structure itself. While the CMM can set different
requirements on the market [6], the market also set up
requirements for the CMM. It should be economically
efficient in the short run and provide correct incentives for
investments as network capacity, production capacity and
even location of consumption. It should also give the right
signal to all market actors such as system operators,
consumers, producers and traders. The methods used for
congestion management can be classified as market based or
non-market based [7]. The Nordpool power market use
predetermined price zones (named bidding areas) and as a
result of that market splitting is used to control congestion
between the zones. However, inside each of the zones counter
trading is used. In this paper the effect on increasing capacity
between bidding areas for the market by using counter trading
is studied.
2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong
111. OVERVIEW OF THE BASICMODEL
Ln this paper two of the CMh4:s used in the Nordpool
power market are combined. In order to simulate the effect on
all market actors a the model developed in [8] have been used.
The model consists of the following mayor parts: Power
Exchange, Congestion Identijication Mechanism (CIM) and
Congestion Management Methods (CMM).
CMM
U@ Power exchange
-a-
output
Figure 1: Schematic overview of the modeling of the power markct
The market is designed with zonal pricing of predetermined
bidding areas. Even though the price calculation use the
Nordpool price calculation as a preface, this model (see [8] for
details) is generalized and can contain n zones and the
capacities between the areas can vary and also be equal to
zero.
A. Power Exchange
A power market model collects the bids from all bidding
areas and aggregates a bid curve. All sell bids are of stepwise
type and submitted negative (Table I.) The system price is
calculated using the basic price calculation. The result of this
calculation is the market cross point between the aggregated
total supply and demand, i.e. identification of accepted bids.
TABLE I
EXAMPLEOF PRICE DEPENDENT STEP VISE BID
0 0 -50 -50 -100 -100. -300
0 160 161 180 181 228 229
B. Congestion Iden tijication Method (CIM)
A tool for identifying congestion using an optimization
algorithm and the minimum cut principle is applied to divide
the network into several price zones. The tool was described
in detail in [8]. If the CIM detects any congestion in the
network it is possible to choose a method for handling
congestion. Price can be set for the entire system, a single area
or several areas together.
c. output
With this model it is possible to see what economic impact
different use of congestion management methods will have on
all parties in a spot market with zonal pricing: system
operators, producers and customers. Case studies illustrate the
impact on the different market actors, depending of both the
situation on the market and the congestion management
method used.
D.Assumptions and simplijications
For the case studies in this paper several assumptions have
been made:
The consumption has no price elasticity and the
amount is perfectly predicted and therefore known in
in advance for each area. This assumption gives a
vertical line for consumption that is in general correct
for end users[9].
For production, all the bids will be according to the
operational cost. The bids will all be of price
dependent type, see Table I. This implies that perfect
competition is assumed.
Loop flows can be controlled and minimized
Congestions inside the bidding areas are not
considered.
COMBINATION OF COUNTER TRADING AND MARKET
SPLITTING
In [8] it was shown that different methods would result in
different impact on different market actors. However, that
approach revealed that market splitting and complete counter
trading resulted in the same operation of the power plants (the
same bids were accepted). The result showed that no
congestion management method is optimal for all market
actors. Therefore it is of great interest to be able to analyze the
impact of different methods. However, when two or more
CMM:s are used in a system.they will affect each other. In a
meshed network, congestion between the predetermined zones
will affect the entire system and might lead to split of zones in
order to relieve congestion. The market risk would decrease if
counter trading were applied in some situation.
g&q
b
-300
1000
b avoid
2: Example to illustratc how counter trading can be used to
Figure
market splitting
The small system above shows a network in a market
where market splitting is used as CMM. Congestion on the
line c has split the network into two separate price zones, with
price a and b. By using counter trading the difference of the
prices can me decreased. However, if the prices are equal then
the method is not a combination but only counter trading.
During recent years there has been a lively discussion
regarding the use of counter trading in the Nordpool market
area [IO]. Actors in the market wants the system operators to
use counter trading not only inside the bidding area but also to
enhance the possible trade between bidding area especially
when temporary bottlenecks occur. A test with extended
counter trading between zones was performed in the Nordpool
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2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong
power market from 1 June 2001 until 31 of December
2001[11]. According to the evaluation it had a positive effect
on the price difference. However, the market for regulating
power from where the counter trading bid was collected was
impoverished which could lead to decreased system security.
A. Requirementsfor implementation of a combination of
market splitting and counter trading up to a predetermined
level
Extended counter trading between areas can be used to
ensure an amount of capacity available for the market. A
typical example is when a temporary bottleneck occur in the
network, the system operator can then use counter trading on
predetermined transmissions up to the original capacity of the
transmission or up to a predetermined level. To decide in
advance which transmissions that can be counter traded is
important for the transparency in the market. The amount of
possible counter trading shall be published in a similar way as
the available capacity is given to the market. Using counter
trading in combination with market splitting will require
special guidelines and rules for the system operators. Today
the market timeline in the Nordpool market can be described
as in figure 3 below.
Day before delivery Day of delivery
I Hour of delivery
-44
f f
Day ahead market Regulating market
Figure 3: Timeline for market settlement
Today bids for the regulating market are used both for
balancing the system and for counter trading. The market is
separated from the spot market and managed by the system
operators. To avoid the problem of weakening the regulation
market[ 113 this simulation is made with the assumption that
all bids on the spot market are automatically available for
counter trading. Already accepted bids are available for down
regulation and bids not accepted can be used for up regulation,
in terms of counter trading. There will be separate pricing for
up and down regulation of counter trading.
v. MODELING
OF COMBINED METHODS FOR CONGESTION
MANAGEMENT
To be able to introduce the presented method of using counter
trading to increase available trading capacity between bidding
areas, the method described in chapter 111 has to be modified
in the following way:
1. System price calculation, congestion identification
and initial market splitting are performed according
to ref 8.
142
Now a new manipulation is implemented in the model:
Calculation of trading capacity available for the
market
capcl (i, j ) = cap(i, j ) + P(i, j )
for i and j = [set of bidding areas]
where: capcr= available capacity after CT (Mw)
cap =original capacity (Mw)
P = amount of counter trading (Mw)
Calculation of zonal prices
Aggregation of bid curves for the counter trading
market
Price calculation for up and down
A. System operator
The system operators manage the trade between low price
end and high price end and receive the income from the price
difference. In these case studies the active system operators on
each sides of every congested transmission line shares the
income equally. The income for the system operators will be
formulated as:
M i = 0.5 (A, -ALP). cap(i,j ) (2)
i
M , =0.5.(A~p - A ~ p ) . z c a p ( i , j ) (3)
1
for i = [set of areas LP end]
for j = [set of areas HP end]
where: A = market price in LP and HP end (SEK / MWCI)
M = economic impactfor system operator (SEK)
For counter trading the system operator compensates the
producers with the difference between zonal price and price of
the regulating power in the relevant bidding areas.
Mi = -(ALP - Allown 1' Pdown (4)
Mj = - AHP ).
pup (5)
for i = [set of areas LP end where counter trading is used]
f o r j = [set of areas HP end where counter trading is used]
where: ALP,AHp =price in LP and HP end (SEK / MWh)
ADOW,,= price for down regulation (SEK / Mwh)
A, = price for up regulation (SEK / Mwh)
A4 = economic impactfor system operator (SEK)
B. Consumer
Buyers in each zone pay the current price of that zone.
They area not active on the regulation market.
Ci = Ai L, f o r i =I..nr of areas (6)
where C, = costfor customers in area i (SEK)
L, = load in area i(MW)
C. Producers
The horizontal part of each stepwise bid represents the cost
of the producer. If no counter trading is affecting the
producers they will receive their income based on the zonal
price where they have submitted their bid.
2004 IEEE Intemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

Bids can be either accepted entirely or partly (the price is

inside a bids step).
Entirely accepted bids:
Areal 1 2 3 4 5 6 7
AUJ = ((bu,s(k)- bu,s (k- 1))" - Pa,s w)) (7)
(4 Actor
k A x x x x x
Partly accepted bids: B x x X
C x x x x x
D x x
where A , , = income for actor a in set areas s (SEK)
The bids are all price dependent bids (Table I). After
b,, = aggregated bid curve in set of areas s aggregation a linear interpolation is made to find the market
= is accepted bids aggregated bid curve clearing point. Bid used for this paper can be obtained from
U
the author's web page [ 131. All loads (Table 111) are perfectly
p(k) =price of accepted b(k) ('SEWMVh)
predicted and known in advance.
TABLE111
Plants used for up regulation receive compensation for up LOADIN BIDDING AREAS
regulation according to (7) and (8). However the price is then Area load (MWh)
replaced by the price for up regulation in the relevant bidding 1 2 3 4 5 6 7
area. For down regulation a modification of (7) is needed: 700 800 600 690 800 400 400
Partly accepted bids:
a.b.(b,,s(k+l)-b,,,(k)) With this input the system balance and the flows of the
A,,, = (9) systems will be according to figure 5.When market splitting is
Pa,s ( k + 1) - Pa,s ( k )
applied, two price zones are identified 1-2-3-6 (LP) and 4-5-7
a = (4 - Pap (4 ( 10 ) (HP).
b = ( 4 k w n - Pa,s(4 (1 1 )
where A , , = income for actor a in set areas s (SEK)
b , , = aggregated bid curve in set of areas s
k = is accepted bids j?om aggregated bid curve
b
p@) =price of accepted b@) (SEWMVh)

VI. CASESTUDIES

A . Test system
A meshed network was used to study the effects of increase
Figure 5: Congestion identification in the test system
capacity according to chapter IV. The network consists of
seven nodes, which in this case is similar to bidding areas. In thefirst scenario line 1-5 will have an increased
capacity due to counter trading and in the second scenario line
3-7 and 6-7 will have increased capacity. Both scenarios will
have the same effect on the zonal prices, which is shown in
figure 6.

3 \.
\I
Swrtemnrice
S
E
K
25
LP zone
Figure 4 Outline of tcst systcm
The outline of the system can be found in figure 4. All - 4 2
capacities in the network is set to 100 MW in each direction. 0 20 40 60 80 100 120
Four actors with different composition of power plants MW
Figure 6 Zonal prices as function of counter trading
compete in one or several of the areas. The actor's activity in
the market can be found in the table I1 below:

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 2004 IEEE International Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong

In the figure, price in the high price end drops towards the
system price as counter trading is increased. However, at 120
MW it drops below the actual system price, this is due to
following reasons. When market splitting divides the system
into two (of more) areas it assumes the zonal prices to be
disconnected as well. The aggregated bid curves will then be
kept separated. If the aggregated bid curve of the high price
end does not contain the price step in which the system price
can be found, it drops to last accepted bid on the high price
end aggregated bid curve. The price in the low price end is
increasing until it reaches the system price at the maximum
counter trading level. Counter trading is only performed in the
areas on each side of the congestion transmission.
+Area
0 O 0 SE I 800
\
C. Second scenario
In the second scenario counter trading is applied on the two
parallel lines 3-6 and 6-7, figure 4. Both transmissions are
increased simultaneously step wise up to 160 where no
congestion occurs. In scenario 2, prices for down regulation in
area 3 & 6 are close to the system price. The up regulation
however, increases significantly, up regulation is activated
only in one area while down regulation is activated equally in
two. Also the bid curve contains more power in the price
around 230 SEK.
D. Results
I ) System operators
In figure 9 the cost for counter trading is shown for the two
1,3,5&6 scenarios. There is a significant difference between the costs
between the two scenarios (Sc 1 and Sc 2) and between up
and down regulation. However, the system operators are
usually non-profitable organizations and their task is to make
maximum use of their existing network and at the same time

"
K 600
maintain the system security. Many operators receive their
*----t income from network tariffs. Additional cost will then
indirectly be charged to all market actors, but this issue is not
considered in this paper.
100000
0
10 30 50 70 90 110
10000 -
MW
Figure 7 Income for system operators in area 1,3,5,6 and respectively 7
1000 -
The income (figure 7) from market splitting is also
identical throughout both scenarios. For area 1,3,5 & 6 the 100 - 4 / 7 +Scl AI

income is identical and in area 7 twice as high, due to 2 Id I-SclA5 I

connected transmissions. 10 - ~-Sc2A6 -
SEK *Sc2A7
B. First scenario
In the first scenario transmission capacity is increase on the 10 30 50 70 90 I10 MW
transmission line between zones 1 and 5. The capacity is
increase up to 220 MW, where the limit for the markets desire Figure 9 Counter trading costs for system operators
is reached. For scenario 1 the prices are almost constant 2) Consumer
during the simulation. The cost for the customers is only slightly changed, area 2
and 5 have the same load and the difference between them
-"- moves from 4% at the starting point to 2% at the highest level
- Cawn area 3 -Caw n area 6 of CT. However, these simulations do not provide enough
information to draw conclusion of whether this method should
600---- -~parea7
be used or not. Realistic data from the actual system needs to
be taken into account when analyzing the issue for real
U)
systems.
3) Producers
In this scenario producers are affected in two ways, either
by change in the zonal price or if they are subject to counter
0, . I , , , I , , , , , trading. Three cases are presented in the result section, the
first is the base case directly from market splitting, the second
is at a level of 50% counter trading and the last is when there
is only 10 MW congestion. They are marked 0, 60 and 110
respectively.

144
2004 IEEE Intemational Conference on Electric Utility Deregulation, Restructuring and Power Technologies (DRPT2004) April 2004 Hong Kong
Figure 10 shows the result for producers in area 1 and 5 for
the three different situations. Income for actors in area 1 and 5
are showed, in area 5 the income is decreasing due to the
decreasing zonal price.
25000
20000
SE
K 15000
10000
5000
0
Area 1A Area 16 Area 56
Producers
Figure IO: Merchandize surplus case 1
In the second scenario more areas and actors are affected. For
actor A in area 7 the income from CT is significantly
increased as the price for up regulation is raised, figure 8. By
A3A A3C A6A A6C
Roducers
Figure 1 1 : Merchandize surplus case 2
using the proposed method the production mixture will change
and bids with higher price and higher costs will be accepted,
which would lead to an increased total system cost.
VII. CONCLUSION
The developed model can be used to model impact on
system where counter trading is used in combination with
market splitting to increase or ensure available capacity for the
market. The paper shows that the price difference between
zones can be adjusted by adding additional capacity to the
market by counter trading. However, implementing such
method will set up new requirements on the market. In
general, even if the total system cost will increase a lower
level of price difference between prices will lower the risk
exposure of the actors and also decrease the risk of market
manipulation.
VIII. FUTURE
WORK
For the model the aim, is to enhance it for use in simulation
of longer time periods to be able to implement bid types such
as block bids and flexible bids.
For analysis of congestion management a test case where
the actor stands out by placing strategically bids on the market
will be performed.
IX. REFERENCES
[I] ECON Center for Economic Analysis, “Testing times: The future ofthe
Scandinmian Electricip Industry” Oslo: PDC Tangen, 2002,
Area 533 ISBN: 82-7645-548-4
[2] H. Glavitsch, G. Andcrsson, Th. Lekane, A Maricn, E. Mces, U. Naef,
“A flow-based methodology for the calculation of TSO to TSO
compensation for cross-border flows” ; Intcmational Joumal of
Electrical Poycr & Energy Systems; Vol26, Number 1 January 2004
[3] R. D. Christie, I Wangensteen, B. F Wollcnbcrg, “Transmission
Management in the Deregulated Enviroment”; IEEE, Vol. 88 No 2 Feb
2000
[4] E. Bompard, P. Corrcia, G. Gross, and M. Amelin, “Congestion-
Management Schemes: A Comparative Analysis Under a Unified
Framework”, IEEE Trans. Power Systems, vol. 18, pp. 346-352, Feb
2003
[5] M. Lommcrdal and L. Soder, “Time dependent congestion
management”, in Proc. 2002 UPEC 2002 - 37Ih International
------I Universities Power Engineering Con$, pp. 564-568
[6] Nordel, “Congestion management in elcctrical networks” [Online].
Available at: www.nordcl.org In Norwegian
[7] L. J. Vries, “Capacity allocation in a restructured electricity markct:
technical and economic evaluation of congestion management mcthods
on interconncctors” Proc. 2001 IEEE Porto Power Tech Conf
[8] M Lommcrdal and L Soder, “Simulation of Congestion Management”
Proc 2003 Bologna PowerTech
A7A A7C
[9] Swcdencrgy, “Risk of business on the Nordic Power Market”, Birger
Gustafsson AB, 2000, ISBN: 91-7622-153-9 In Swedish
[lo] Nordel Market Committee, ”Review of the clspot grouping and
conditions for counter trading in the Nordic power market”, may 2002
[Online] Available at: www.nordel.org
[I I] Nordel Report, “Test Period for Countcrtrading”, December 2001
[Online] Available at: \*ww.nordcl.org In Swedish
[I21 M Lommerdal and L Soder, “Simulation of Congestion Management”
Proc 2003 Bologna PowerTech
[ 131 M Lommerdal “Homepage”, 2003, available at:
http:l/www.ckc. kth .se/ees/lo~nax!t~ongkong.html
X. BIOGRAPHIES
Magnus Lommerdal was bom in Rimho, Sweden in 1975. He received his
BSc. degree in Electrical Engineering from Midsweden University;
Hkimosand, Sweden in 1999 He joined the High Voltage Cablc Dcpartment of
ABB 1999. Sincc 2001 he has been working on his Ph.D. at the Royal Insti-
tute of Technology (KTH), Stockholm, Sweden.
Lennart Soder (M’ 91) was bom in Solna, Sweden in 1956. He received his
MSc. and Ph.D. degrees in Electrical Engineering from the Royal Institute of
Tcchnology, Stockholm, Sweden in 1982 and 1988 respectively. He is
currently a professor in Electric Power Systcms at the Royal Institute of
Technology (KTH). He also works with projects concerning deregulated
electricity markets and integration of wind power.
145