Electricity Markets

Power traded as a commodity in wholesale auctions even though it cannot be stored at scale.

Overview

Regional grid operators run day ahead and real time auctions where generators bid and the marginal unit sets the price at each node. Demand and supply must balance every second, so scarcity events spike prices to caps, thousands of dollars per megawatt hour in the Texas freeze of 2021, while midday solar floods push California prices negative. Batteries increasingly arbitrage the spread, charging on cheap sun and discharging at the evening peak. Fuel costs, hydro, wind, and sun set the merit order, weather is the market, and capacity auctions and ancillary services stack revenue streams on top of energy sales.