Locational Marginal Pricing

This educational video clip from Enerdynamics' online course on Wholesale Power Markets explains how locational marginal pricing works and how the prices are calculated. Want more on this topic? You can purchase the entire Electric Market Dynamics course at bit.ly/2fi1OAO

[@bobshively1133]

Jeffry, thanks for your comment. But this is not the way LMP works. All generators get paid, and all consumer pay, the highest price of a dispatched unit. This is why it is called marginal cost pricing. The concept is that all generators get paid the market value of their generation, not their cost of generating.

[@jeffreywaldo1742]

In the unconstrained example, I don't understand why all the loads on Node 1 should pay $42 just because the cost to get the final MW necessary is $42. Seems appropriate for each offer of supply at a particular price ($35, $36, $38, $40, $42) be honored at the offered price. Not a higher price than the supplier originally offered.

[@avicstaghlem5527]

Got the same question too

[@schoenhier]

could you explain why without constraints you used the same price for all and with constraints not, since the 38$ offer is only used for the second node, why has the first node to pay that ?

[@Enerdynamics]

The question is - if there were one more MW of demand at a node, how would it be served? In the case of no constraints, new load at Node 1 would be served by further ramping the $42 unit on the right. So the marginal cost of additional load on Node 1 is $42. Therefore that is the appropriate price for loads at Node 1 to pay. In the constrained case, additional load at Node 1 could be served by ramping the $38 unit, so the marginal price for Node 1 is now $38. Without constraints, it doesn't matter where the load is located, it all has the same marginal energy cost.

[@avicstaghlem5527]

Got it man , thz so much