The move toward low-carbon electricity generation in electricity markets around the world creates challenges in ensuring that the future location of generation development optimizes the joint costs of generation and transmission. In this issue of Energy Market Insights, NERA Director Sean Gammons, Senior Consultant Richard Druce, and Professor Goran Strbac of Imperial College, London, discuss the transmission charging approaches taken in different markets and the extent to which they provide locational signals for generation investors. Using Great Britain as a case study, the authors quantify the differing impact of locational charging versus uniform charges based on the resulting differences in transmission system costs (including the costs of constraints and losses, as well as transmission investment) and final power prices. The results highlight that locational signals remain an important element of efficient market design even in decarbonized power markets.

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