Plugged In: the energy news podcast
Nodal or Zonal?
Dec 1, 2023
Stephen Woodhouse, Director Afry Management Consulting, and Phil Hewitt, Director, Montel EnAppSys, discuss the pros and cons of locational prices in the UK electricity market, including the benefits and challenges of transitioning to a zonal market. They explore the implications of a centralized dispatch system, the comparison to European intraday markets, and the ongoing debate between nodal and zonal pricing. They also address the potential impact on existing contracts with a Contract for Difference (CFD).
28:37
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Quick takeaways
- Locational pricing can incentivize renewable generation to match demand and facilitate the flow of excess generation between zones.
- Zonal pricing offers clearer price signals, encourages efficient transmission investments, and allows for the continuation of intraday markets.
Deep dives
The Benefits of Locational Pricing: Driving Renewable Generation and Encouraging Transmission Investment
Locational pricing, whether nodal or zonal, can have several benefits. In the UK, where there is a concentration of renewable generation in the north and high demand in the south, a locational pricing system could incentivize renewable generation to match demand. This would mitigate the need to turn down renewable generation due to transmission constraints and replace it with more expensive fossil generation. Additionally, locational pricing provides price signals that encourage the construction of transmission infrastructure between zones, facilitating the flow of excess generation from areas with surplus to those with deficits.
