The language of the power market, in plain English.
20 terms — locational pricing, congestion, storage economics, the instruments desks hedge with. Each opens in plain English, then carries a section for the trader, analyst, or engineer who needs the mechanics, and 16 of them show the thing being defined happening right now in live ERCOT data.
Prices & settlement
How a megawatt-hour gets a price, why that price differs from one substation to the next, and which number an invoice is actually computed from.
- Locational marginal pricing (LMP)The price of delivering one more megawatt-hour of electricity to a specific place on the grid at a specific moment.Live ERCOT prices
- Nodal vs. zonal pricingTwo ways of pricing electricity by location: one price per electrical node on the grid, or one averaged price per large zone.Live ERCOT prices
- Settlement point priceThe official price at which energy is actually bought and sold at a named location in ERCOT — the number invoices are computed from.Live ERCOT prices
- Day-ahead vs. real-time marketsThe two-stage structure of wholesale power: a forward market that schedules tomorrow, and a spot market that trues up what actually happens.Live ERCOT prices
- ERCOT price cap (system-wide offer cap)The maximum price ERCOT's energy market can reach — the ceiling that defines scarcity pricing in an energy-only market.Live ERCOT prices
Load & planning
Who is responsible for balancing a region second by second, how demand is shaped across a day and across a summer, and how future availability gets paid for.
- Four Coincident Peak (4CP)ERCOT's method of billing transmission costs based on a customer's demand during the four highest system peaks of the summer.
- Duck curveThe shape of net demand in a solar-heavy grid: a deep midday dip as solar floods in, then a steep evening ramp as it disappears.Live ERCOT fuel mix
- Balancing authorityThe entity responsible for keeping electricity supply and demand matched, second by second, within a defined region of the grid.
- Capacity marketAn auction that pays resources for being available in the future, whether or not they end up producing energy.
Grid & congestion
What happens when the wires run out of room — the limits that bind, the output that gets turned down, and the queue of projects waiting to plug in.
- CongestionWhat happens when transmission lines can't carry all the cheap power that wants to flow, forcing prices to differ across locations.Live ERCOT constraints
- Binding constraintA transmission limit the grid has actually hit, forcing the market to reroute dispatch — with a shadow price measuring how costly the limit is.Live ERCOT constraints
- CurtailmentDeliberately reducing a power plant's output below what it could produce, usually because the grid can't absorb it or prices make it uneconomic.Live ERCOT fuel mix
- Interconnection queueThe waiting line of proposed power plants and batteries seeking permission to plug into the grid.
Storage
How a grid battery earns its money, what limits it hour to hour, and the ERCOT market redesign that finally models it as one resource.
- Battery arbitrageCharging a battery when electricity is cheap and discharging when it is expensive, earning the spread.Live ERCOT storage
- State of charge (SOC)How full a battery is right now, usually expressed as a percentage of its usable energy capacity.Live ERCOT storage
- RTC+B (real-time co-optimization plus batteries)ERCOT's market redesign that prices energy and reserves together every five minutes and gives batteries a first-class state-of-charge model.Live ERCOT storage
Markets & risk
The products a grid buys readiness with, the instruments desks hedge a location with, and the exposure and utilization measures they judge an asset by.
- Ancillary servicesThe standby products — reserves and fast response — that grid operators buy to keep the system stable when something goes wrong.Live ERCOT fuel mix
- Basis riskThe risk that the price where you actually buy or sell power moves differently from the price where you hedged it.Live ERCOT prices
- Capacity factorThe share of a power plant's maximum possible output that it actually produces over a period of time.Live ERCOT fuel mix
- Financial transmission rights (FTRs / CRRs)Financial instruments that pay their holder the day-ahead congestion cost between two points on the grid — the standard hedge for locational price risk.Live ERCOT constraints