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CHAPTER 5

CONGESTION MANAGEMENT

5.1 INTRODUCTION

In general, one of the suppositions that define the framework for

perfect competition is free entry and exit to the market in other words, free
market access should be guaranteed in a perfect competition. This
prerequisite is not fulfilled in transmission markets therefore it is a natural
monopoly. The first important step of power industry restructuring is the
transmission open access.

Transmission services have been unbundled as separate businesses

from generation. However regarded as a natural monopoly, the
transmission sector remains more or less regulated to permit a
competitive environment for generation and retail services. The operating and
planning of transmission network and the pricing of the transmission services
are still retained as challenges on both theoretical and practical aspects in
the development of electricity markets.

Transmission congestion can be defined as the condition where

desired transmission line-flows exceed reliability limits. Following this
definition, congestion management can be defined as the actions taken to
avoid or relieve congestion. More broadly, congestion management can be
considered any systematic approach used in scheduling and matching
generation and loads in order to manage congestion. Electricity, unlike
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many other commodities can’t be stored easily and its delivery is constrained
by some physical transmission limits that have to be satisfied all the time to
keep the operating security of the power system. With transmission limits,
the deregulation of the power industry is more difficult therefore one of the
major responsibilities of any type of SOs in any type of electricity markets is
to manage transmission congestion and constraints.

5.2 TRANSMISSION NETWORK IN ELECTRICITY MARKET

The function of transmission system in a vertically integrated

structure was to connect the utility’s generators to the utility’s customers and
to operate the system reliably. The transmission systems were interconnected
by different utilities to increase reliability, share reserves and take
advantage of economic exchanges. If transmission congestion occurred, the
utilities solved it by either generation re-dispatch or load-reduction to
support reliability and economic transactions. These corrective actions
and also expectations for load growth and future electricity prices and
availability were a feedback for system evaluation in both a real-time
basis and long-term planning purposes. A solution for new transmission
facilities could be developed and presented to the regulator for approval and
the final decision could then be implemented and the costs passed on to
customers. Utilities and regulators made the investments decisions with
prudent investment and operational costs borne by customers.

Although, the electric power industry restructuring has moved

generation investment and operations decisions into the competitive market
but transmission was left out as a communal resource in the regulated
environment and despite the widespread experience of restructuring
during the past decade, important issues remain open about the best way to
operate transmission to support reliability management and market trading.
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In some models the mixing of competitive generation and regulated

transmission makes congestion management difficult, and in some other
models the huge quantity of bilateral transactions which could stress the
existing transmission network heavily, has made the transmission
congestion management one of the toughest problems in electricity market
design and operation.

The product or output provided by a transmission system is a

transport service: the movement of electricity, from one point on the
network to another, at the request of a system user. Before completing such
transaction, the generator and the customer must secure the right to transmit
electricity. This right can be offered with a stronger or weaker guarantee
that the service will be provided when needed. Rights can be combined,
to allow transmission to and from a number of points. Any right will have to
be accompanied by an assurance of quality, in terms of frequency control
and reactive power control and the reliability of the service.

The most of electricity markets a special entity the so-called System

Operator (SO) exists. This monopoly can be either a non-profit or a for-
profit entity. The for-profit entity is called TransCo (Transmission Company).
It owns, operates and manages the transmission system a s a natural
monopoly.

A TransCo could maximize its profit by withholding transmission

capacities, thus it is heavily regulated. The other choice is to introduce a
non-profit entity that is usually called Independent System Operator (ISO).
In contrast to the TransCo the ISO does not own but manage the
transmission network. It does not have a motive to withhold transmission
capacities in order to maximize its profit. Thus it is only slightly regulated.
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5.3 CAUSES FOR TRANSMISSION CONGESTION

The deregulation of the power industry was much easier without

transmission limits. These limits are the main causes for transmission
congestion and can be listed below.

5.3.1 Thermal Li mits

Colliding electrons in the AC power line c au se electrical resistance

and resistance interferes with current in a wire, producing heat. As a wire
heats up, it softens. Since power lines are heavy, their weight makes them
sag as heat builds. Beyond a certain temperature the overloaded line will be
permanently damaged. It is caused not only by real power flow but also by
reactive power flow.

5.3.2 Voltage Magnitude Limits

Voltage constraints define operating bounds that can limit the amount
of power flowing on transmission lines. Voltage constraints inevitably require
attention to both the real and reactive power loads and transfers in the AC
transmission system. Consumption of reactive power tends to make the
voltage sag. Often this must be corrected by injecting reactive power locally
because reactive power is not easily transmitted over long distances.

5.3.3 Stability Limits on Power Lines

Power flows through AC power lines because the voltage at the

generator end reaches its maximum slightly ahead of the voltage at the load
end. The amount by which the generation voltage is ahead is called the
phase angle beyond 90 degrees, power flow decreases become completely
unstable. This is the lines physical stability limit. Angle stability can be
classified into two categories: small-signal stability, which is the ability of
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the system to maintain synchronism under small disturbance; transient

stability, which is the ability to maintain synchronism when subjected to a
severe transient disturbance

5.3.4 Voltage Stability Limits

Voltage stability is the ability of a power system to maintain steady

acceptable voltages at all buses in the system under normal condition or
after being subjected to a disturbance. The main factor causing voltage
instability is the inability of the power system to meet the demand for
reactive power. The heart of the problem is usually the voltage drop that
occurs when active power and reactive power flow through inductive
reactance associated with transmission grid.

5.3.5 Contingency Constraints

Transmission system operators leave some unused capacity on power

lines in case an unexpected event (a contingency) occurs somewhere on
the system. If, for example, a large power line drops out of service, the power
flows will shift to other lines at the speed of light. The power system
operators’ job is to ensure that none of those power lines overloads.
Contingency constraints are fundamental element of economy-security
control. Contingency analysis identifies potential emergencies through
extensive simulations on the power system network. A more conservative
estimation of transmission capability will be obtained after considering the
post-contingency constraints.
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5.4 Features of Congestion Management

Different market structures and market rules lead to different

methods for congestion management. Basically, a proper approach for
resolving transmission congestion in competitive electricity markets should
at least have the following features

 Each market participant, a consumer or a producer, should be treated

equally and the price for a specific good at a specific place and time
should be the same for everybody
 The m e t h o d s h o u l d g i v e incentives to producers, consumers and
the network operator to improve the systems in order to relieve
transmission constraints.
 The implementation should be well defined and transparent for all
participants.
 The available resources like information, computer systems need to
be capable of producing the necessary quantitative results in the
time frame available.
 In a real system the surrounding ISOs and their specific
methodologies have to be taken into account. The
implemented system needs to interact with other systems.

5.5 Sequence of Congestion management

The Figure show in 5.1 shows the sequence of congestion

management the steps are listed below

1. The capability of the network to transmit power must be

expressed as a “transmission capacity”. The first phase of congestion
management is thus to determine the amount of TTC and ATC which is very
important system information to be published in any electricity market.
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2. The capacity allocation step is required to distribute the ATC

among the network users wishing to utilize it.

3. After the transmission capacity has been allocated and the

wholesale energy markets are settled, the ISOs perform a congestion
forecast and determine if the foreseen constellation of power generation and
consumption will be feasible or if the network security limits will be
breached.

4. If during phase 3 a violation of network security limits is

foreseen, the ISOs must take measures to relieve the network.

Bids Dispatch
reservations schedules

Determination Capacity Congestion If required

of available allocation forecast congestion
transmission alleviation
capacity

Figure 5.1 Sequence of congestion management

5.6 Types of Congestion Management Methods

The delivery of electrical energy from point to point is partly governed

by the capacity of the transmission lines and transformers. Congestion is said
to occur whenever the system state of the grid is characterized by one or more
violations of the physical operational or policy constraints under which the
grid operates in the normal state or under any one of the contingency cases in
a set of specified contingencies. In other words congestion occurs when the
transmitted power exceeds the capacity or transfer limit of the transmission
line or transformer. The capacity of a transmission line or transformer may
have different values under different conditions. Congestion, needless to say,
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is undesirable. A system without congestion will have a uniform price (in

nodal pricing). As soon as we have congestion, prices in some areas will
increase and in others decrease. Congestion therefore distorts the market.
Another disadvantage of congestion is increased risk of market manipulation
by some participants. In the VIC the economic load dispatch was normally
formulated as an optimal power flow (OPF) problem with the objective of
minimising total generation cost subject to, generation lower and upper limits,
bus voltage limits, power flow limits of lines and transformers and etc.
Congestion was therefore intrinsically managed at the dispatch stage.

In the deregulated market, congestion is likely to occur more often

since the market for the selling and buying of energy may be settled without
the constraints of the power system imposed. The ensuring generation
schedules may result in some transmission paths being congested. Congestion
management remains the central issue in transmission management in
deregulated power systems. Congestion management (CM) includes both the
congestion relief actions and the associated pricing mechanisms.

Congestion may be alleviated through various ways. Among the

technical solutions we have outaging of congested lines, operation of FACTS
devices and operation of transformer tap changers. Among the non technical
solutions we have market based and non market based methods of CM. Non
market based methods are those where no form of market mechanism is used
to allocate the scarce transmission capacity but use other reasonable criteria.
These include sharing of capacity on a pro rata basis where users share in
proportion to their requirements, first come first serve and preference for
certain types of contracts.

The non market based methods for congestion management do not

send any signals for investment and have no measure of the value of the
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congested line. Market based methods are based on market mechanisms and
hence give an indication of the value of the scarce resource of transmission
capacity. These methods are briefly discussed below.

5.6.1 Nodal Pricing

In the nodal pricing scheme every bus in the grid is treated as a zone.
The locational marginal price (LMP) for each bus is determined by the ISO
by carrying out an economic dispatch with the flow limits. The LMP becomes
the price and payment that buyers pay and the generators receive respectively.
The market is settled with the network constraints hence congestion does not
arise.

5.6.2 Zonal Pricing

In Zonal pricing system buses with similar LMPs are aggregated into
zones. The market is first settled constraint free. Each zone will have a price
for energy that buyers can pay and sellers receive. In the case that congestion
occurs the ISO receives supplementary bids for increase and decrease of
generation. The most expensive supplemental bid for increase of generation
becomes the price for that zone and the cheapest supplemental bid for
decrease of generation becomes the price for that zone. In this way the ISO
earns congestion rent over the congested lines. In case that there is no
congestion the zonal prices will be the same. The California market migrated
from this CM mechanism to the zonal pricing method.

5.6.3 Re-Scheduling

In this method of CM the market is settled without the constraints of

the transmission system being applied. If congestion occurs the ISO re-
schedules the generation in such a way that congestion is get rid of. This will
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entail the ISO purchasing power from high price areas. The generators in the
low price areas will be commanded to regulate downwards. Since the ISO in
essence is buying power at a high price and selling it at a lower price he
incurs a cost. The net cost incurred by the ISO is an indication of the
congestion charge and is a signal for investment. The ISO directly commands
generators to up regulate or down regulate without the use of the market.

5.6.4 Counter Trading

Counter trading is a modified form of re-dispatching the difference

being that up and down regulation power is obtained from the market. The
generators submit bids for up and down regulation on the balancing market.
Similar to the re-dispatch the ISO will incur net cost in the purchase of
regulation power since he has to use more expensive power for up regulation.
Sweden uses this form of CM. Counter trading may be viewed as a special
type of re-dispatching. In this thesis we shall use these methods for clearing
congestion.

5.6.5 Market Splitting

In market splitting the market is first settled without constraints

applied. If the resulting schedules cause congestion on some line(s) the
market is then split and settled separately with the transfer limit applied. The
ISO purchases power from the low price area and sells it in the high price
area. The ISO thus makes a profit. Norway uses this CM method.

5.6.6 Auctioning

In auctioning the available capacity of a normally constrained path is

auctioned by the ISO receiving bids from parties willing to use the path. The
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lowest marginal bid accepted becomes the price for transmission on the path.
Two forms of auctioning are in use i.e. implicit and explicit.

5.6.7 Load Curtailment

By managing load, congestion can also be effectively relieved. The

benefits result from reduced peak demand and reduced pressure on both
electricity generation and distribution systems. The amount of curtailed load
should be as small as possible and the price in the congested area should fall
as much as possible. While there are many different kinds of curtailment
algorithms, a parameter termed as willingness-to-pay-to-avoid-curtailment
was introduced in which is regarded as a highly effective instrument in setting
the transaction curtailment.

5.6.8 FACTS

FACTS are a new technology developed in recent two decades, and it

has been widely put in practice in the world. FACTS are defined by the IEEE
as a power electronic-based system and other static equipment that has the
ability to enhance controllability, increase power transfer capability.
Nowadays, power producers and system operators all over the world are faced
with increasing demands for bulk power transmission, low-cost power
delivery and higher reliability, to some extent; such issues are being alleviated
by the developing technology of FACTS. FACTS could be connected either
in series or in shunt with the power system or even in a combined pattern to
provide compensation for the power system. Variable series capacitors, phase
shifters and unified power flow controllers as the most used FACTS devices
can be utilized to change the power flow which result in many benefits like
losses reduced, stability margin increased etc. Due to such features of
FACTS, integrating it into the congestion management becomes more and
more popular.
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5.6.9 First Come, First Served

Capacity is allocated according to the order in which the transmission

requests have been received by the ISO. Starting from the earliest request,
all requested amounts of capacity are fully granted until the available
capacity is used up. This method encourages participants to make
longer forecasts. Thus, it allows better and sooner security assessment for the
ISO who knows accurately the volume of exchanges in advance. However,
this method may not leave enough room for short-term trading, which is a
requirement to ensure the success of market dynamics. This method is well
suited for bilateral trades, but fails to provide an efficient priority
mechanism for day-ahead or real-time pool transactions.

5. 6. 10 Pro Rata Rationing

In this method no real priority is defined. All requests are partially

accepted in the way that the ISO curtails them in case of congestion
according to the ratio: existing capacity/requested capacity. This rule is
transparent but brings the participants to an economically inefficient use of
the system.

5.6.11 Outaging Congested Lines

In this method congested line is identified by the system operator and

they are decides the possible methods for relieving the congestion by
economical way. If it is not possible the system operator may outage the
congested line for secure operation of the system .This may riser power flows
in the neighboring lines. In this method some of the area isolated from the live
network of the system.
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Figure 5.2 below has listed most of the methods utilized in CM. The
light-shaded methods are always considered as remedial methods which let
the market function as if there are no constraints and leave it to the TSO to
take measures to maintain system security. By raising the price of the
congested part of the network in order to reduce trade to relieve the
congestion, the heavy-shaded methods are so called pricing methods.

Outaging of congested lines

Technical Methods Transformer tap changers

Operation of FACTS devices

Auctioning

CM
Market splitting

Counter trading

Market-based Rescheduling

Load curtailment

Nodal pricing

Non-Technical Method
Zonal pricing

First come, first serve

Non Market-
based
Pro rata

Figure 5.2 Summary of congestion management methods

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5.7 CONCLUSION

In a pool market the market price and hence the schedule of generation
is determined from submitted bids by the GENCOS and consumer bids by the
loads. The scheduled generation is determined from the total amount of power
sold by a GENCO in the market. Market settlement is carried out without
network constraints though losses may be accounted for by using the loss
formula. The market only considers the generation limits.

It has been found that the market settlement schedule may lead to
violation of the line capacity limits since these are not taken into account in
arriving at the dispatch schedule. To solve this congestion the ISO re-
dispatches generation. The re-dispatch is an optimization problem and has
been simulated with two objectives:

 Minimization of total absolute re-dispatch

 Minimization of cost of congestion or net payment by ISO

It is important to appreciate that the market settlement gives the most

economical schedule and deviation from this schedule should be minimized.
In re-dispatching the system there is a system cost increase owing to the
increase in power output of generators which are less favorable and reduction
of output of preferred generators. The increase in system cost is the cost of
congestion from a societal point of view.

The ISO has to pay for congestion based on the regulation bids. It is
concluded that when congestion is managed by re-dispatch there is an
increase in system cost and also the ISO incurs a cost. This cost incurred by
the ISO is an indication for the need of investment for transmission capacity
in the system. Congestion management is the most important roles that the
ISO plays in the electricity market. He ensures that the system is operated
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safely. The presence of congestion on a regular basis can be used by

generators to distort the market. The generators that are regularly up regulated
may submit very expensive bids since they know that their generators are
required for congestion management. Persistent congestion is therefore
undesirable. The market participants i.e. GENCOS and loads are oblivious to
the cost of congestion if we employ re-dispatch as the mode for solving
congestion. The market carries on as if there was no congestion.

This behavior may be desirable but may encourage gaming by some

generators. We expect market behavior in the short run to be repetitive and
hence some GENCOS may take advantage as earlier stated by bidding higher
for regulation power than their marginal costs. It has been observed that the
use of FACTS devices such as TCSC and TCPAR is able to reduce
congestion and the amount of re-scheduled power or the cost of congestion.
This ensures that the system is run as close to the market settlement schedule
as possible.