Analyzing congestion surplus distribution based on social welfare optimization

Abstract

The distribution of congestion surplus affects not only the short-term economic interests of stakeholders in the power spot market, but the improvement of social welfare in the long run. At present, the congestion surplus in mature electricity spot markets of developed countries is usually returned to the power users or power generation enterprises according to established proportions. Although this method helps achieve rational distribution of congestion surplus, it does not offer a solution to the congestion problem and cannot achieve maximized social welfare. In light of the principles of welfare economics, we propose in this paper injecting the congestion surplus into the capital pool of the power grid as a transmission line expansion fund to fundamentally solve the power transmission congestion problem. Modeling results and case studies presented in our work verified that our proposed distribution model could achieve Pareto optimization. Finally, combining the power transmission and distribution (PTD) pricing and supervision method, this paper puts forward the method for use and supervision of congestion surplus on the power spot market to reach optimal allocation of resources.