Monthly Archives: July 2017

How Do Electricity Prices Reflect Transmission Congestion?

Most spot electricity markets establish locational marginal prices (LMPs) that reflect the unique value of energy at each location or node on the network.  Components of the LMP include the system marginal price, losses, and the cost of transmission congestion. When a transmission facility reaches its operating limit, higher-cost units must be dispatched instead of lower-cost...