Introduction of nodal pricing into the new mexican electricity market through FTR allocations

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The change from a subsidized zonal pricing system to a full nodal pricing regime in the new Mexican electricity market could improve the efficiency of electricity system operation. However, resulting price modifications might also swing surplus across producers and consumers. In this paper, we calculate nodal prices for the Mexican power system and further analyze how allocations of financial transmission rights (FTRs) can be used to mitigate resulting distributional effects. The share of FTRs to be allocated to different generation plants and loads is studied as a second step of an electricity tariff subsidy reform agenda that includes, as a first step, the change to nodal pricing and, as a third step, the reformulation of actual regressive subsidies in a progressive way. We test our model in a realistic nodal price setting, based on an hourly modeling of the Mexican power system.

Original languageEnglish
JournalThe Energy Journal
Volume38
Issue numberSI 1
Pages (from-to)157-172
Number of pages16
ISSN0195-6574
DOIs
Publication statusPublished - 01.09.2017
Externally publishedYes

    Research areas

  • Congestion management, Electricity, Financial transmission rights, Mexico, Nodal prices
  • Economics

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