Application Of Financial Transmission Right (FTR) In Congestion Management

Whether or not the transmission grid can operate normally is not only related to the system's security and reliability, but also to the power market competition. According to the locational marginal price (LMP), when congestion exists, the congestion cost will affect the LMP seriously. So there should be some congestion management method which can help market participant avoid LMP risk and provide correct signals to guide the long-term grid plan.Introduction of Financial Transmission Right (FTR) in congestion management can lead to reasonable usage of the grid capacity, and help to compensate for the loss of related consumers after congestion. It provides a financial tool for market participants to hedge against congestion risks.This paper presents the theoretical foundation of FTR and the operation condition of PJM FTR market, and discusses the feasibility of introducing FTR to East China power market. Then this paper designs the trade varieties, auction model and methods of surplus distribution accoridng to the realistic condition of East China power market. The objective of the auction model is to maximize the revenue of FTR auction. The model considers the stability constraints of both normal condition and N-1 condition simultaneously. Moreover, there are two kinds of FTR products in the FTR market which includes obligation FTR and option FTR. Participants can choose from them according to their demand to avoid the congestion risks. Finally, this paper takes the reduced East China power grid as an example to analyze the influence the FTR aution brings to market participants in different bidding stategies.