Tag Archives: markets

How can markets set efficient prices in peak demand hours?

Prices during peak demand hours are critical for the economic efficiency of electricity markets.  During peak times, quick-starting peaking units are usually started and dispatched.  In the tightest hours, operators may take emergency actions to increase the real-time supply or decrease demand.  Efficient pricing in peak hours requires that the costs of these actions be...

How Do Electricity Prices Reflect Transmission Congestion?

Most spot electricity markets establish locational marginal prices (LMPs) that reflect the unique value of energy at each location or node on the network.  Components of the LMP include the system marginal price, losses, and the cost of transmission congestion. When a transmission facility reaches its operating limit, higher-cost units must be dispatched instead of lower-cost...