The language of the power market, in plain English.
14 working definitions — each readable by anyone, each with a deeper cut for the technical reader.
Prices & settlement
- 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.
- 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.
- 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.
- 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.
Grid & congestion
- CongestionWhat happens when transmission lines can't carry all the cheap power that wants to flow, forcing prices to differ across locations.
- 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.
- 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.
- Interconnection queueThe waiting line of proposed power plants and batteries seeking permission to plug into the grid.
Storage
- Battery arbitrageCharging a battery when electricity is cheap and discharging when it is expensive, earning the spread.
- State of charge (SOC)How full a battery is right now, usually expressed as a percentage of its usable energy capacity.
- 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.
Markets & risk
- Ancillary servicesThe standby products — reserves and fast response — that grid operators buy to keep the system stable when something goes wrong.
- Basis riskThe risk that the price where you actually buy or sell power moves differently from the price where you hedged it.
- Capacity factorThe share of a power plant's maximum possible output that it actually produces over a period of time.