Administrative congestion management meets electricity network regulation: Aligning incentives between the renewable generators and network operator

Abstract

Administrative congestion management mechanisms are commonly used to integrate renewable generation (RES) into capacity-constrained distribution networks. We study the compensation of RES curtailment as an efficient design element. Compensating curtailment allows for efficient network expansion while distorting the RES investment. Leaving curtailment without compensation improves RES investment incentives while reducing the network expansion efficiency. An economic regulation dilemma results. We propose aligning incentives with the help of a congestion-payments fund that mediates financial flows between the network and generation. A curtailment scheme capable of efficiently managing network congestion becomes possible.