CSEM WP 145 Ramsey Pricing in a Congested Network with Market Power in Generation: A Numerical Illustration for Belgium

This paper derives the socially optimal transmission prices in a congested electricity network when there is imperfect competition in generation, and when the budget constraint of the network operator is binding. The results which we derive are a generalization of the standard Ramsey prices and also of the locational marginal prices (LMP). The model is illustrated with a numerical model based on the Belgian electricity data. ∗ The authors are indebted to Ronnie Belmans, Severin Borenstein, Jim Bushnell, Bruno De Borger, Ben Hobbs, Shmuel Oren, Stef Proost, Yves Smeers, Patrick Van Cayseele, Frank Verboven and Jian Yao for their valuable comments. Any remaining errors are the responsibility of the authors. Financial support from the UC Energy Institute's Center for the Study of Energy Markets is gratefully acknowledged. † K.U.Leuven Energy Institute, Naamsestraat 69, 3000 Leuven, Belgium, e-mail: [email protected], [email protected]