https://austinvernon.site/blog/electricitymarkets.html
- Markets manage roughly 2/3 of US electricity generation
- Electricity demand is generally inelastic, such that demand is slow to change in the face of price change.
- Demand is elastic.
- Gas power plants need constant gas flow through pipelines which is bought on a market (responsive to demand).
- Coal would be bought at everyday prices ahead of time.
- Nuclear and geothermal also buys fuel ahead of time but has high up front capital costs.
A node is a point where electricity is either injected into the grid (generation) or withdrawn from the grid (consumption).
In the UK, most households have a fixed contract for electricity. The industry regulator sets a price cap (default price) based on market forecasts over three months. Businesses are exempt from this price cap so their contracts are more volatile.
The price of all electricity in a trading period is set by the marginal generator (the last one to be ‘turned on’) to meet demand.