Question

Explain how the price of electricity in wholesale markets is determined in a given hour.

Answer 1

Answer:
In economic terms, electricity is also a commodity capable of being bought, sold and traded in various markets. Its price in wholesale markets is determined in the following ways in a given hour:

• Wholesale transaction is cleared and settled by the market operator which handles exclusively these deals.
• Bids and offers are made to trade electricity in this market and price is being decided based on demand supply principles.
• Long term trades also happen in this market which are like contracts similar to power purchase agreement, where at a defined rate a bulk amount of electricity in a given unit is being purchased.

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