Congestion Management by Dispatch or Re-dispatch: Flexibility Costs and Stochastic Effects

Several European electricity spot markets use simplified methods such as uniform or zonal pricing. These methods only partly address congestion. Re-dispatch is then necessary to achieve a feasible flow. In the assessment of congestion management methods we address congestion relief in both spot and re-dispatch markets. Bjørndal et al. (2013) discussed the effects of flexibility costs in a deterministic setting, and they showed that limited participation and extra costs of readjustment can make the spot and re-dispatch model of handling congestion inefficient compared to nodal pricing. In this paper we extend the analysis to include stochastic effects, e.g., supply variability caused by intermittent renewables, or variability in demand. We develop a stochastic model where dispatch and re-dispatch are represented as sequential stages, and where the optimal schedule in the dispatch stage will be influenced by knowledge about events that may take place in the re-dispatch stage. The model is applied to a simplified model of the Nordic power market, and we discuss the combined effect of uncertainty and flexibility costs for different choices with respect to congestion management method.