Congestion Induced Price Spread in the Swedish Electricity Market

Congestion in the transmission network induces price spread between bidding zones in the electricity market. The price spread is the difference between the zone price with congestion and the zonal price without congestion. The latter, the so-called "uniform price", is calculated as the intersection of the aggregated demand and supply curves for the whole country. In this paper, the price spreads for the different bidding zones in Sweden are calculated over a year to analyze the impact of congestion on the electricity market. Price spread results show that the day-ahead market was cleared without congestion between four bidding zones, during about 60% of the hours. When congestion occurs, SE1 and SE2 are more likely to have a zonal price below the uniform price, and SE3 and SE4 have a higher zonal price than the uniform price. If the price spread is negative, the impact is calculated by multiplying the price spread by the zonal power generation. If the price spread is positive, it is multiplied by the consumption to calculate the impact. The numerical outcomes from the impact calculation reveal that there is a relatively small risk for producers in the SE1 and SE2 bidding zones and a much larger risk for consumers in the SE3 and SE4 bidding zones.