Summary
Differences in locational spot prices in an electric network provide the natural measure of the price for transmission. The ubiquitous problem of loop flow requires different economic intuition for interpreting the implications of spot pricing. The DC-Load model is the usual approximation for estimating spot prices, although it ignores reactive power effects. This approximation is best when thermal constraints create congestion in the network. In the presence of voltage constraints, the DC-Load model is insufficient, and the full AC-Model is required to determine both real and reactive power spot prices.
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Hogan, W.W. (1996). Markets in Real Electric Networks Require Reactive Prices. In: Einhorn, M., Siddiqi, R. (eds) Electricity Transmission Pricing and Technology. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-1804-7_7
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DOI: https://doi.org/10.1007/978-94-009-1804-7_7
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