Nodal Pricing

Nodal pricing sets electricity costs at specific locations (nodes) based on local supply, demand, and grid congestion, offering more precise price signals than zonal pricing.

How It Works
The grid is divided into nodes, each with its own electricity price reflecting real-time energy supply and transmission constraints. Prices drop in areas rich in renewables.

Grid Efficiency
Nodal pricing encourages investment in cost-effective power generation, reduces congestion by reflecting real-time grid conditions, and helps utilities manage electricity flow more efficiently to balance supply and demand.

Implementation & Challenges
Primarily used in wholesale electricity markets, nodal pricing provides precise cost signals, but its complexity and need for real-time data make it challenging to implement for residential customers.