Kirchhoff vs. Competitive Electricity Markets: A Few Examples

Electric power is often regarded as a homogeneous commodity due to the ubiquity of the transmission grid. This paper, however, presents a collection of cases in which the physical laws governing network flows can have anomalous and unexpected market implications. For example, reactive power requirements can affect optimal unit commitment and impact real power prices in otherwise competitive markets. Network topology and constraint interactions can result in other unwelcome market phenomena, such as large price differentials within a congestion zone, nodal prices well above the highest offer and "cascading market power".