Congestion Rent Formula

2

Transmission Congestion and Congestion Rent

Clarification of Congestion

Transmission congestion occurs when there is insufficient capacity on the transmission system to accommodate all the power that is being generated. This can lead to price differences between different regions of the grid, as generators in congested areas may have to pay higher prices to deliver their power to customers.

Types of Congestion

There are two main types of congestion: * LOCATED CONGESTION: Occurs when there is insufficient capacity on a specific transmission line or substation. * NETWORK CONGESTION: Occurs when there is insufficient capacity on the entire transmission system.

Congestion Rent

Congestion rent is the difference between the price of electricity in a congested area and the price of electricity in an uncongested area. This difference represents the cost of congestion to generators and consumers.

Calculation of Congestion Rent

Congestion rent is calculated using a formula that takes into account the following factors: * The amount of congestion on the transmission system * The cost of generating electricity * The demand for electricity

Estimated Congestion Rent

The Independent System Operators (ISOs) estimate that they collected approximately $1 billion in congestion rent in 2020. This money is used to fund transmission upgrades and other projects that help to reduce congestion.

Slideshare