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Nodal Price Difference by Transmission Loss

Nodal Price Difference by Transmission Loss: A Technical Study of the NEMS
Lu Feiyu, Senior Market Analyst
Original Publication Date: November 2004

One of the most revolutionary changes in the electricity industry worldwide over the last 20 years is the progression of pricing from fixed, to time-of-use to place-of-use. Place-of-use or locational marginal price is used in both the US and in Singapore, among others. The NEMS models the transmission system at the circuit level and therefore naturally employs the nodal price regime. Nodal prices differ because of two key factors: transmission congestion and transmission loss. This paper focuses on the relationship between nodal prices and transmission loss.