Grid Constraint

KPX must manage grid constraints and congestion in light of the physical state of the transmission system, and do so in the most economic and effective way. The Electric Utility Act defines a mismatch between generation capacity and transmission capacity as a 'transmission constraint'.

Korea's day-ahead market is a physical-grid-based market that builds its schedule while reflecting transmission constraints, generators' self-constraints and reserve constraints. So a cheap generator may run less because of transmission lines, or an expensive one may have to run to keep a particular area stable. Generators that must run because of grid constraints can be excluded from setting SMP, and variable costs they cannot recover at the market price are covered by a separate settlement payment.

News-reading tip: stories saying 'the plant is built but can't run because there are no transmission lines' are about grid constraints. The resulting costs are shared across the whole market through constrained generation and settlement.