Tracking the wholesale
electricity market
Get the energy data and market prices you need at a glance — or contact us to learn more. NRG tracks the competitive markets to keep wholesale market participants and stakeholders up-to-date with the latest market performance.
Tracking the wholesale
electricity market
Get the energy data and market prices you need at a glance — or contact us to learn more. NRG tracks the competitive markets to keep wholesale market participants and stakeholders up-to-date with the latest market performance.
Putting the electricity market in context with real-time market operations data
Electricity doesn’t exist in a vacuum. It’s part of a wide-ranging, ever-evolving marketplace. Finding the right energy solution for your business, is based equally on your current and future needs and on an understanding of where the energy market is now and where it may be headed.
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Wholesale electricity market 101
Understanding the wholesale electricity markets and the North American power grid.
Electric power market explainer
The electricity market is a complex system that involves various players, including generators, distributors, retailers, and consumers. The market operates in two main segments, the wholesale market, and the retail market.
North America comprises of nine Independent System Operators (ISO) or Regional Transmission Organizations (RTOs):
■ Alberta Electric System Operator (AESO)
■ California independent system operator (CAISO)
■ Electric Reliability Council of Texas (ERCOT)
■ Midcontinent Independent System Operator, Inc. (MISO)
■ ISO New England (ISO-NE)
■ New York Independent System Operator (NYISO)
■ Ontario Independent Electricity System Operator (IESO)
■ PJM Interconnection (PJM)
■ Southwest Power Pool (SPP)
The RTOs and ISOs manage the transmission of electricity on a regional level, and each has its own short-term electricity market. The short-term markets facilitate the purchase and sale of electricity to meet the immediate needs of consumers.
The RTOs and ISOs short-term markets operate in real-time or near real-time, with trading occurring every hour, every 15 minutes, or every five minutes, depending on the region. The markets rely on supply and demand, and prices are determined by the marginal cost of the last unit of energy that was needed to meet demand.
In the short-term market, electricity is bought and sold in two ways: day-ahead and real-time. A locational marginal price (LMP) will be set at each location based on published ISO/RTO prices.
Day-ahead markets
Day-Ahead markets are used to procure electricity for the following day. Market participants submit bids and offers for electricity based on their expected costs and willingness to pay for the following day's electricity supply. The RTO or ISO then matches the bids and offers to determine the clearing price for electricity for each hour of the following day. Day-Ahead Markets help to ensure that there is enough electricity supply to meet forecasted demand, and also help to reduce the volatility of real-time prices.
Real-time markets
Real-Time Markets are the most dynamic and volatile markets, where electricity is bought and sold in real-time. These markets operate 24/7 and are designed to manage the real-time balance between electricity supply and demand on the grid. In Real-Time Markets, market participants submit bids and offers for electricity based on their expected costs and willingness to pay. The RTO or ISO then matches those bids and offers to determine the clearing price for electricity in that market. The clearing price is the price that all market participants pay for the electricity they consume during that specific hour.
Locational Marginal Pricing (LMP) for wholesale electricity
Locational Marginal Pricing (LMP) is a system of pricing that reflects the true cost of delivering electricity to a specific location on the grid. The cost of delivering electricity can vary depending on a range of factors, such as congestion on the transmission system, the distance between the generator and the load, and the location of transmission constraints. LMP helps to ensure that the price of electricity reflects the true cost of delivering it to the location where it is consumed.
There are three components that make up the LMP price:
System Energy Price + Transmission Congestion Cost + Cost of Marginal Losses = LMP
Additional resources to better understand energy markets
Terms and definitions
- Congestion - The state of high demand for electricity that exceeds the capacity of the transmission system, resulting in delays or disruptions in the delivery of electricity.
- Capacity - The amount of electricity that can be generated and delivered by the electricity system at any given time.
- Day-ahead market - A market where electricity is bought and sold for the following day, and the clearing price is determined based on bids and offers from market participants. This market represents around 95 percent of energy transactions and is based on forecasted load for the next day and typically occurs the prior morning in order to allow generators to prepare for the operation.
- Distribution - The process of delivering electricity to end-users, such as homes and businesses, through local distribution systems.
- Electric utilities - public or private entities that own and operate the transmission and distribution lines that transport electricity and supply it to households and businesses.
- Electricity market - A system that facilitates the trading of electricity between producers and consumers.
- Federal energy regulatory commission (FERC) – FERC is an independent agency responsible for the regulation of interstate transmission of natural gas, oil, and electricity
- Generation - The process of producing electricity from a fuel source, such as coal, natural gas, or renewable sources.
- Grid - A complex interconnected network that generates, transmits, and distributes electricity along 120,000 miles of power lines.
- Independent system operator (ISO) - A non-profit entity responsible for ensuring the reliability and efficiency of the electricity transmission system and operating various markets that facilitate the trading of electricity.
- Locational marginal price (LMP) - A pricing system that reflects the true cost of delivering electricity to a specific location on the grid.
- Real-time market - A market where electricity is bought and sold in real-time, and the clearing price is determined based on bids and offers from market participants.
- Regional transmission organization (RTO) - A transmission operator that coordinates, controls and monitors an electric grid, and regulated by FERC. It is similar to an ISO and are often referred to interchangeably.
- Transmission - The process of transporting electricity from power plants to local distribution systems via high-voltage transmission lines.
Acronyms
DA |
Day-Ahead |
| DA-SPP | Day-Ahead Settlement Price Point |
| ISOs | Independent System Operators |
| LBMP | Locational Based Marginal Price. |
| LMP | Locational Marginal Price |
| RT | Real-Time |
| RT-SPP | Real-Time Settlement Price Point. |
| RTOs | Regional Transmission Organizations |
| SPP | Settlement Price Point |
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