Evaluating Offshore Electricity Market Design Considering Endogenous Infrastructure Investments: Zonal or Nodal?

• DOI: 10.48550/arxiv.2405.13169
• Publication Date: 2024-05-21
• Authors: Michiel Kenis; Vladimir Dvorkin; Tim Schittekatte; Kenneth Bruninx; Erik Delarue; Audun Botterud
• Keywords: FOS: Economics and business; General Economics (econ.GN); Economics - General Economics

Policy makers are formulating offshore energy infrastructure plans, including wind turbines, electrolyzers, and HVDC transmission lines. An effective market design is crucial to guide cost-efficient investments dispatch decisions. This paper jointly studies the impact of choices on investment in electrolyzers capacity. We present a bilevel model that incorporates infrastructure, day-ahead dispatch, potential redispatch actions near real-time ensure constraints respected. Our findings demonstrate full nodal pricing, i.e., pricing both onshore offshore, outperforms zonal combined with or layouts. While combining can be considered as second-best option, it generally diminishes profitability farms. However, if costs relatively low, they serve catalysts increase revenues study contributes understanding designs for highly interconnected power systems, offering insights into congestion methodologies Besides, useful towards interaction loads like financial support mechanisms