###### Abstract  
Electricity markets are transitioning to zonal and nodal pricing to maximize social welfare, improve price signals, and enhance congestion management. South Korea, traditionally reliant on uniform pricing, is evaluating this transition but lacks a detailed impact analysis. This study assessed the impacts of various zonal and nodal pricing schemes on power systems and provided policy implications for this transition. We (1) modeled the power system at various levels of granularity, obtaining a detailed 4579-node representation; (2) constructed a set of zonal and nodal pricing schemes reflecting changes in market-clearing models and pricing mechanisms; and (3) performed quantitative analyses through simulations for each scheme. Under the current system marginal price (SMP)-based uniform pricing, the schemes with the least market impact are SMP-based zonal pricing with two bidding zones and extended locational marginal pricing. These results can guide the development of an appropriate pricing transition pathway, although a market price reduction of 4.8-7.0% appears inevitable. Within the Korean electricity market, wherein a Transco is a monopoly retailer, we identified potential conflicts of interest for the Transco in zonal and nodal pricing. By focusing on South Korea, this study offers valuable insights into any electricity market considering the transition to zonal and nodal pricing. electricity market design; extended locational marginal price (ELMP); locational marginal price (LMP); nodal pricing; system marginal price (SMP); zonal pricing +
Footnote †: journal: Applied sciences  
0000-0002-4800-3300-3300][PERSON]  
0000-0002-0002-3300-3300][PERSON]  
0000-0002-3300-3300-3300-330 Recently, the global shift in energy policy from fossil-based sources to zero-carbon systems has facilitated a rapid increase in renewable energy sources. This has posed new challenges for power system operations. In the short term, the intermittent nature of renewable energy sources has increased system-balancing needs and the associated redispatch costs, whereas, in the long term, this transition intensifies the geographical separation between the load centers and generation sources, thereby exacerbating grid congestion problems [4; 7; 8; 9; 10; 11; 12]. To address these issues, several electricity markets are transitioning to more granular pricing schemes such as zonal and nodal pricing. These schemes reflect the locational system conditions more accurately. Consequently, they can improve economic price signals to guide investment decisions to appropriate locations, enhance congestion management, and ultimately maximize social welfare. Historical transitions from zonal to nodal pricing demonstrate this trend. ERCOT, which previously operated zonal pricing with four to five zones, switched to nodal pricing in 2010 due to mounting costs of managing zonal congestion and inefficiency of the redispatch process [13]. Similarly, CAISO transitioned to nodal pricing in 2009, primarily driven by inadequate congestion management under the zonal system, as the zonal model used for market clearing failed to sufficiently resemble the actual flows and constraints on the physical network. Moreover, forming new zones proved intractable in the zonal system [14]. Following these precedents, several other markets are pursuing similar transitions: Australia and Japan are currently pursuing a transition from zonal to nodal pricing, whereas South Korea, the UK, and Germany, which currently employ uniform pricing, are considering introducing zonal pricing. Additionally, IESO is planning to transition from uniform to nodal pricing through its Market Renewal Program to enhance market efficiency [15; 16; 17; 18; 19; 20; 21]. However, transitioning between these pricing schemes involves complex issues. In particular, the financial impact on market participants is the most significant obstacle to the transition process.