Effects of price caps on nodal prices of electricity

This paper developed an OPF model including price caps based on the duality theory of linear programming. Implementing price caps on the nodal prices is equivalent to implementing an upper bound on a function of the Lagrange multipliers of the primal problem, which are the variables in the dual problem. By solving the dual of the modified dual problem, we can find how the price caps affect the power system. This model clearly reveals how price caps affect nodal prices, generation dispatch, and load. It illustrated not only the price distortions that occur as a result of price caps, but the inability to solve the problem in several cases with price caps unless "extra generation" (however obtained) or "load shedding" is assumed