Construction of the Decomposition of Locational Marginal Prices
DOI:
https://doi.org/10.46842/ipn.cien.v28n1a01Keywords:
locational marginal prices, envelope theorem, economic dispatch, mexican electricity marketAbstract
This paper exposes the way in which the decomposition of Locational Marginal Prices (PML) is constructed into its energy and congestion components using the envelope theorem. PML is perhaps the most widely used methodology around the world to determine energy prices, and one of the best-known concepts of this clearing mechanism is its decomposition into the sum of two or three components, depending on the model used; however, why this happens is less well understood. For this reason, in this document a formal, but simple justification of the construction of such a decomposition is provided.
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