From short to long term marginal prices - advantages and drawbacks

In this paper we present models to compute short term and long term nodal marginal prices in transmission networks. Short term marginal prices are evaluated as sub-products of operation optimization problems and lead to a marginal based remuneration that is typically small when compared to the regulated amount. To address this Revenue Reconciliation Problem we developed a long term expansion planning problem in the scope of which long term nodal marginal prices are computed. The algorithm uses Simulated Annealing to take into account the discrete nature of several decisions and is able to consider a multi-period dynamic approach. The paper presents results from some case studies in order to clarify the advantages and drawbacks of these methodologies.