Impact of inter-regional energy trade on the net welfare of an individual market

Improved market efficiency from combining markets through inter-regional market coordination can lead to significant changes in the consumer and producer surplus of an individual market since inter-regional energy trading can significantly alter energy prices and market shares across various regions. It is necessary to study the impacts of inter-regional energy trading on the net welfare of an individual market as the volumes of inter-regional energy trading continue to grow. Energy trading between regions increases the overall social welfare of markets unless uneconomic power flow occurs between those regions. Inter-regional energy trade may have different implications for the consumers and generators of an individual market, depending whether they are in an importing market or in an exporting market. This paper investigates how inter-regional energy trade affects the net welfare of an individual market in interconnected electricity markets. A numerical example is presented to validate the analytical results developed in the paper