Analysis of the Spanish congestion management mechanism

Abstract

In electricity markets, different mechanisms are used to solve congestion on the system. In the Spanish electricity market, the day-ahead is cleared without taking into account the technical constraints, and subsequently a counter-trading mechanism is used to solve the congestion that appear in the system. Even assuming that generation companies cannot modify the electricity price, they may behave strategically. They may modify their bids to avoid being dispatched in the day-ahead market, but being dispatched in the counter-trading mechanism. Therefore, the counter-trading mechanism allows generation companies to behave strategically in the electricity market. Meanwhile, that behavior does not exist in a zonal price system. This paper presents a simple case to analyze the inefficiencies of the congestion management mechanism used in Spain, comparing it with a zonal price system.