The AEMO calculates a ‘Local Price Adjustment’
- for many connection points in the NEM (i.e. those which corresponds to a sub-set of relevant DUIDs),
- for each dispatch interval
- where that connection point is affected by a subset of (Explicit) Constraint Equations that are invoked and bound in that dispatch interval.
A few core principles to understand …
Shows some ‘impact’ of congestion (but it’s not a complete guide!)
It’s important for readers to understand what the LPA can be interpreted as showing … and what it does not show:
1) A non-zero LPA for a DUID suggests that there are one (or more) constraint equations bound:
(a) With that DUID on the LHS; and
(b) Where the AEMO has deemed the constraint equation as related to network congestion (as distinct for other reasons why a constraint equation might be invoked and bound).
2) The magnitude (and direction) of the LPA is of some significance …
(a) It is a function of how that DUID has bid (in conjunction with bids for everyone else that is on the LHS of the constraint), and also
(b) A function of its LHS factor … in conjunction with the LHS factors of everyone else in the constraint.
3) But it does not necessarily indicate that a DUID might be ‘constrained down’ (or ‘constrained up’) in conjunction with a non-zero LPA. Specifically:
(a) A large LPA does not necessarily mean ‘constrained up’ or ‘constrained down’; whereas
(b) A small LPA does not necessarily mean that the DUID is not ‘constrained up’ or ‘constrained down’
… so please don’t misinterpret!
Used in calculating ‘Local Price’ for a DUID
The Local Price Adjustment is one input in calculating the ‘Local Price’ (which we formerly referred to as the ‘CPD Price’).
Further reading
For users to understand more about the Local Price Adjustment:
1) we suggest they refer to version 5 of the the AEMO’s ‘Guide to Mis-Pricing Information’ as a useful starting point.
2) any articles we write with reference to the Local Price Adjustment (and where we remember to do so) we will tag them with ‘Local Price Adjustment’.