Redispatch in Zonal Pricing Electricity Markets

Zonal pricing electricity markets operate sequentially. First, the suppliers compete in a spot market. Second, to alleviate the congestion in the transmission line, in a redispatch market, the suppliers in the importing node are called into operation to increase their production, and the suppliers in the exporting node are compensated to reduce their production. I characterize the equilibrium in a zonal pricing electricity market when the competition is imperfect by using four different redispatch designs to alleviate the congestion in the transmission line. I find that the consumers welfare and suppliers' profits depend crucially on the realization of the demand, and on the type of redispatch design implemented to alleviate the congestion in the transmission line, and that could introduce long term investment distortions