Zonal vs Nodal Pricing

This workshop aims to map out the pros and cons of implementing nodal pricing for the electricity sector in Europe, referring to the relevant international experience.

The geographical structure of the EU electricity market has been widely discussed in recent years. Its less-than-optimal configuration is becoming a limiting factor for the efficiency of the market integration process. The EU electricity sector suffers from high levels of Unscheduled Flows (UFs), which are partly due to the suboptimal geographical (zonal) configuration of the market. It is also likely that the increasing penetration of variable renewable-based generation will increase the level of UFs.

Consideration should be given to whether Europe should move from a zonal market structure to a nodal pricing structure, as this would avoid UFs by design. However, such pricing might pose other challenges.

The Workshop will be structured in two sessions:

• Session I will review the experience with the implementation of nodal pricing for the electricity market, including its impact on market price and basis risk hedging and liquidity;
• Session II will use the results of the first session to discuss the benefits of moving the EU electricity market design towards a nodal price structure, as well as the associated challenges.

This workshop is a part of the FSR Regulatory Policy Workshop Series 2018-2019 and is exclusively open to national regulators, representatives from public bodies and associate & major donors of the FSR Energy area.

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