Locational Marginal Pricing is an attempt by PJM to change transmission congestion from a purely technical problem to one solvable by economics. LMP is a flexible pricing system that reflects differences in electricity production costs, locations of generators and users, and total system demand.
All of these are variable elements not reflected in a one-price-fits-all system. According to PJM, "LMP is the marginal cost of supplying the next increment of electric energy at a specific location node on the Electric Power Network, taking into account both generation marginal cost and the physical aspects of the transmission system.
PJM recognized about "nodes" within their system, and calculates prices based on where a given block of electricity enters the system and where it exits the "source node" and the "sink node".
When lines become congested, dispatchers bring generators into service which can meet demand while avoiding the congestion. Since these generators are higher cost units or they would have already been in service , a Transmission Congestion Charge is added into the price. The Congestion Charge applies to all, but the actual amount depends on the locations of the "source" and the "sink.
Companies can buy Fixed Transmission Rights on a given route as a hedge against Congestion Charges, though some risk remains. An FTR-owner receives credit for congestion charges if they receive electricity over the route covered by the FTR when congestion occurs. If the delivery route changes perhaps to take advantage of a lower priced generator the FTR-owner might receive a "negative credit," otherwise known as a bill.
Due to this risk, buyers are allowed to trade FTRs on a secondary market. As you can imagine, this is a very complex pricing system. It relies heavily on computers to constantly monitor the grid's status, track bids and prices, determine which generators can effectively produce more or less electricity, and process all of this data in a Locational Price Algorithm.
In order to function, a tremendous amount of real-time information is made available to market participants via the Internet. PJM hopes this pricing structure will provide an economic incentive which alleviates congested lines. Reviews after 7 months of operation are mixed. Trading in PJM contracts initially declined as traders struggled to figure out the complicated system; a difficult task with variable points. The OASIS computer programs Open Access Same-time Information System which make Internet-based trading of electricity contracts feasible, have been subject to some early criticism in the industry and may not be ready to deal with something as complex as LMP.
Generally, traders prefer a certain amount of predictability, but LMP's nodes and flexible nature tend to preclude this. This has resulted in predictions that, eventually, there may be as few as three entities responsible for the entire North American grid. Sample 1. Sample 2. Sample 3. Geothermal energy means energy contained in heat that continuously flows outward from the earth that is used as the sole source of energy to produce electricity.
Noncommunity water system means a public water system that is not a community water system. Net energy metering means the difference between the kilowatt-hours consumed by a customer-generator and the kilowatt-hours generated by the customer- generator's facility over any time period determined as if measured by a single meter capable of registering the flow of electricity in two directions. Interconnection Customer means a person or entity that interconnects a distributed generation facility to an electric distribution system.
Fertility Services means treatments and procedures to help you become pregnant. Community water system means a public water system which serves at least 15 service connections used by year-round residents or regularly serves at least 25 year-round residents.
Water Service means the furnishing of water to a cus- tomer through a District-owned water meter or meters. Interconnect means to connect an alarm system including an automatic dialing device to a telephone line, either directly or through a mechanical device that utilizes a telephone, for the purpose of using the telephone line to transmit a message upon the activation of the alarm system.
Renewable energy system means a fixture, product, device, or interacting group of fixtures, products, or devices on the customer's side of the meter that use 1 or more renewable energy resources to generate electricity. Renewable energy system includes a biomass stove but does not include an incinerator or digester.
Interconnection Service s means any Interconnection, Resale Services, c 3 UNEs, Collocation, functions, facilities, products or services offered under this Agreement.
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