Congestion

Every line and transformer has a limit in MW, set by heating or by stability. Power flows along all available paths according to physics, so one plant's output spreads across many lines. When the flow on one element would exceed its limit, the grid operator has to change the dispatch. It turns down generation on the exporting side and turns up generation on the importing side, even if those plants cost more.

Markets show this in prices. In a nodal market, a binding constraint raises prices downstream and lowers them upstream. In a zonal market, prices split into separate areas when the link between them is full. Inside a zone, the grid operator pays plants to move up or down while the market price stays uniform. Congestion tends to follow patterns. It appears on sunny afternoons where solar is clustered, or on winter evenings on lines into cities, and it eases as new transmission is built.

Congestion decides what a plant earns and how much of its output gets through. A solar project in a region crowded with solar may see low local prices or frequent curtailment while the system-wide price looks healthy. Developers screen sites for it before committing, and lenders expect to see it in the revenue case. For IPPs, congestion patterns shape bidding. For buyers, they set the cost of moving power between regions.

In the US, congestion shows up directly in nodal prices, and market participants hedge it with financial transmission rights. In Europe, congestion between bidding zones splits prices, while congestion inside a zone is handled by redispatch, with the costs recovered through network charges. In India, congestion on inter-regional corridors splits the exchange price into bid areas, and limited corridor capacity can cut open-access trades short.