Grid Economics

Open Market

A market where buyers and sellers of electricity directly interact to buy and sell electricity.

Pooling

Since electricity cannot practically be directed from a producer to a consumer, the electricity is pooled in the grid.

Spot Market

The market that corrects for inevitable imbalances of supply and demand in the pool.

Gate Closure

The time by which purchasing agreements must be set before power is sent to the grid.

Reverse Auction

Providers publish their costs and amount of power available. Grid operators then purchase power starting with the lowest cost power until grid needs are met.

Everyone is paid at the price of the highest accepted bid.

Fixed Costs

Costs associated with the generation of electricity that do not vary with the amount of electricity produced.

Examples include capital costs and some maintenance costs.

Variable Costs

Costs associated with the generation of electricity that do vary with the amount of electricity produced.

Examples include fuel costs.

Levelized Cost of Energy (LCOE)

The cost to produce energy considering the fixed and variable costs of that electricity over time.

Levelized Avoided Cost of Energy (LACE)

The value of the energy that did not have to be provided because of a new generation source of energy.