A

AESO

AESO stands for the Alberta Independent System Operator, one of Canada's two ISOS.

Alternating current

Alternating current is current that changes direction periodically.

This is a market that the ISO or RTO uses to ensure that enough generation is available in the immediate future. In the ancillary service market, a generator offers to hold back a certain amount of power, for a certain price, to use if necessary. Participants in the ancillary service market are usually spinning reserves or reserves that can be ramped up (or down) quickly.

Auction revenue right (ARR)

An auction revenue right is a market participant's entitlement to a share of revenue generated in annual FTR auctions and/or entitles an entity to convert its ARR to FTRs.

B

Bal-day

The balance of the day is a contract settling at the average on-peak, real-time price at a particular hub for the remainder or balance of the day, traded on ICE or other bilateral exchanges.

Bal-month

The balance of the month is a contract settling on the average price for the month for the selected peak type.

Bal-week

The balance of the week is a contract settling on the average price for the week for the selected peak type, traded on ICE.

Balancing authority

This is another term for a control area operator. A balancing authority is an entity responsible for dispatching power plants and operating the transmission system for a specific region of the electrical grid. In regulated areas, this is typically a large utility, but it can be a smaller municipality or a federal power agency. In competitive markets, this is the role of the ISO or RTO.

Baseload generators

Baseload generators run the majority of the time; they meet the load that is essentially always present.

Battery storage

Battery storage is a method of storing electricity for later use.

Bid to bill

A category of vendors and solutions that support the physical flow of electricity and end-to-end participation in ISO and RTO markets. This includes front-office bidding and scheduling, mid-office operational processes, and back-office settlement and billing workflows.

Bilateral trading

Bilateral trades are made directly between two parties, for example, between two utilities. Bilateral trades primarily take place in structured, vertically integrated markets; however, they can take place in competitive markets.

Black start generator

This is a generator that can be started without electricity and then used to start the rest of the power plant.

Brownout

A brownout is a dip in the voltage level on the electric line. It can be intentional or unintentional.

Bus

A bus is an interconnection point on the grid.

C

CAISO

CAISO stands for the California Independent System Operator.

Capacity factor

Capacity factor is generation in MW divided by either the nameplate, summer, or winter capacity, multiplied by 100.

Capacity market

This is a market used by the ISO or RTO to ensure there will be enough generation available in the coming years. Generators can offer to remain operational for a set period of time for a fee, called a capacity payment.

CENACE

CENACE stands for Centro Nacional de Control de Energia, Mexico's competitive electricity market.

Clearing price

The clearing price is the price the buyer and seller agree on. Once they agree on the price, it clears the market.

Coal plants

Coal plants are power plants that produce electricity by burning coal to heat water. This produces steam, which turns the turbines, which turn the magnets producing electricity.

Combined cycle plants

Combined cycle plants use both a combustion turbine and a steam turbine to produce electricity more efficiently. The combustion turbine runs as usual, then the exhaust heat produced by the combustion turbine that would otherwise go to waste is captured to create steam that turns the steam turbine, producing more electricity.

Combustion turbines

Combustion turbines ignite fuel to expand it, rotating a turbine connected to a generator that produces electricity.

Commodity

Commodities are products or goods that are interchangeable and can be bought or sold. Examples are oil and coffee.

Congestion

Congestion is similar to a traffic jam - it occurs when there is too much electricity traveling across a transmission line. Congestion can also occur when another line goes down, creating a binding constraint on another piece of transmission equipment. Congestion is the most variable component of the LMP.

Congestion revenue right (CRR)

This is the name for financial transmission rights in CAISO and ERCOT.

Constraint

A transmission constraint occurs when there is too much power flowing across a transmission line. If actions are not taken to alleviate the constraint, damage to the line can occur.

Contingency

Equipment that has been identified whose deactivation could overload other transmission equipment in the area.

Consumer

A consumer is someone using an economic good or service.

D

Day-ahead market

The ISO or RTO predicts the next day's load in the day-ahead market and schedules generation to supply that load.

DECs

This is short for decrement offers, a type of virtual trade where the trader bids to buy power at or below a certain price point at a specific pricing node.

Department of Energy (DOE)

The Department of Energy's mission statement is "to ensure America's security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions."

Distributed energy resources (DERs)

DERS are small-scale power generation or storage technologies that can provide an alternative to or an enhancement of the traditional electric power system. They can be located on the distribution system, a subsystem of the distribution system, or behind a customer meter.

Deregulated markets

Vertically integrated utilities own and operate the grid in regulated energy markets. Deregulated energy markets allow for increased competition by enabling a larger number of participants to participate in generation and transmission services.

Deregulation

Deregulation is the decrease or eradication of the government's involvement in a specific industry. It usually occurs in an attempt to increase competition in the industry.

Direct current

Direct current is electrical current flowing in one direction, unlike alternating current.

Dispatch types

Dispatch types are categories of power plants that system operators use to determine which to call upon to produce generation. The types are baseload, intermediate, peaking, and intermittent.

Distribution

Distribution is the system by which electricity is delivered to the end user. Electricity is transported on lower voltage lines, analogous to residential roads, before arriving in homes and businesses. Distribution consists of the distribution substations, distribution lines, and distribution transformers.

Duck curve

The duck curve illustrates the difference between total electricity demand and the amount supplied by renewable sources, typically solar power.

E

Economic dispatch

The system used by the ISO or RTO to determine which generators will be used at what times of day. The system of economic dispatch uses the cheapest feasible generation providers first, only taking the more expensive generator's offers when necessary to meet the forecasted load.

EIM

The EIM is the Western Energy Imbalance Market. It is operated by CAISO, and unlike the other ISOs, participation in EIM is completely voluntary. EIM is a real-time market, not a day-ahead and real-time dual settlement market like the other ISOs and RTOS. See an EIM map.

Electric cooperatives/cooperative utilities

Electric cooperatives are utilities that local communities build and own.

Electrical grid

This is a giant, complex circuit with many sources (generators), conductors (transmission lines), and consumers (electrical demand).

Electricity markets

This is a system enabling purchases through bids to buy and offers to sell. Bids and offers use supply and demand principles to set the price.

Electricity storage

Electricity storage is a means to store electricity during periods of relatively high production and low demand, then release it back to the electric power grid during periods of lower production or higher demand.

Electromagnetic generators

Electromagnets use Michael Faraday's discovery that moving a magnet in a coil of copper produces an electric current in the wire. Electromagnetic generators use rotating electromagnetic shafts surrounded by a stationary case made of insulated coils of wire. When the shafts turn the magnet inside the wire casing, it produces an electric current.

Energy-only market (EOM)

An energy-only market is a market where power producers are paid only for the power they actually provide.

ERCOT

The Electric Reliability Council of Texas is the ISO/RTO in Texas.

eTagging

eTagging is short for electronic tagging. It refers to an electronic record that details a transaction for scheduling the movement of electricity across the physical power grid.

F

FERC

FERC stands for the Federal Energy Regulatory Commission. It's a regulation organization ensuring reliable, efficient, and sustainable electricity.

Financial power market participants

Financial participants are participants who bid into the market but are not generating or consuming load. Financial participants provide liquidity to the market and encourage economic efficiency.

Financial transmission rights (FTRs)

Financial transmission rights are financial contracts where there is no obligation to deliver electricity. They are similar to spreads - they are transmission paths from a source to a sink, but they are much longer-term contracts than spreads.

Federal Power Commission (FPC)

The Federal Power Commission was the predecessor of the Federal Energy Regulatory Commission (FERC).

G

Gas plants

Gas plants are power plants that use natural gas as their main fuel input to generate electricity.

Generation

SOS schedule generation in the day-ahead and real-time markets using the system of economic dispatch.

Generation scheduling

SOS schedule generation in the day-ahead and real-time markets using the system of economic dispatch.

Generic transmission constraint

In ERCOT, generic transmission constraints are one flavor of transmission constraint that shapes market fundamentals such as shift factors.

Gross generation

This is the total generation produced by the plant/unit off the generator.

H

Heat input

Heat input is a measure of the fuel used by the generator (usually measured in mmBtu).

Heat rate

Heat rate is a measurement of generator efficiency. You calculate it by dividing the heat input (mmBtu) by the total electrical output (MW). The lower the heat rate, the more efficient the plant.

Hedging

Hedging occurs when an individual or entity makes an investment to reduce the risk associated with another one of their assets. Often, assuming an offsetting position is a hedge.

Hub

A hub is a group of nodes within a region or zone for which several LMPs are used to create a single price to represent a geographical area.

Hydraulic turbines

See hydro dams below.

Hydro dams

Hydro dams produce electricity by preventing the natural flow of water and siphoning water through the dam's penstock. At the end of the penstock, the water turns the turbine that rotates the magnets producing electricity. Dams use flowing water to turn turbines rather than steam.

I

IESO

IESO stands for the Independent Electricity System Operator, one of Canada's two ISOS. See the IESO map.

INCs

This is short for increment offers, a type of virtual trade, where the trader sells power into the day-ahead market for a given price at a specific pricing node.

Independent power producers (IPPs)

Independent power producers are generators owned by entities that are not utilities or municipalities.

Independent System Operator (ISO)

SOS are independent, not-for-profit organizations, with the responsibility of coordinating generation and transmission. ISOs have two main goals: providing reliable and cost-effective electricity.

Injection capacity

Injection capacity is the amount of power that can be injected at a physical point on the power grid.

Integrated resource plan

This is a process for a utility to forecast future demand, evaluate all its options for satisfying that demand, and develop a supply plan for serving it. Utilities will consider weather patterns, demographics, and business activity to forecast demand. This typically is done seven to 10 years out from build.

Intercontinental Exchange (ICE)

ICE is an intermediary organization, or exchange, for over-the-counter (OTC) and bilateral trades. ICE trading is purely speculative. While transactions are tied to ISO pricing signals, they are transacted completely on ICE and not through the ISO.

Intermittent generators

Renewable power sources are intermittent generators. Their output is based on uncontrollable environmental factors, and no one can precisely plan their dispatch. See their impact on the power grid.

J

K

L

Levelized cost of energy (LCOE)

This is the cost that a generator will pay for each MW of energy over a plant's entire lifespan. The LCOE is made up of four costs (capital costs) the cost of building, fixed costs (operational costs excluding the cost of producing the power, i.e. labor, maintenance, lights on), variable costs (operational and maintenance costs based on use/dispatch), and fuel costs.

Liquidity

Liquidity is the feasibility and ease of exchanging an asset for cash. If it's easy to exchange the asset for cash, it is a liquid market; if it's difficult to exchange the asset for cash, it is an illiquid market.

Load

Load is the total demand for electricity at any point in time. The end consumers represent the load.

Load curve

Load curve is a graph that shows the demand for electricity by hour across the day. System operators use a load curve to determine how they will manage the grid each day.

Load forecast

Load forecast is the analysis of historical data, weather forecasts, etc. to predict energy demand.

Locational marginal price (LMP)

The LMP is made of three parts, the marginal energy, loss, and congestion components. The cost of producing the next MW of energy depends on the actual cost of generating that MW.

Load serving entities (LSE)

They're entities providing electricity to individuals or wholesale buyers.

M

Manual settlements

Settlement processes that rely on spreadsheets and manual calculations to reconcile market transactions. Manual settlements increase operational risk and complexity compared to automated settlement systems that systematically calculate, validate, and reconcile financial results. The PowerCore solution replaces spreadsheet-based, manual settlement processes with automated software.

Marginal unit

The marginal unit is the power plant that is called on to supply the next MW of power. It sets the clearing price for the market.

Mark to market

When a trader executes a future trade, the price he or she executed that trade at is referred to as the "mark." As time progresses, the future prices will change (market). Mark to market refers to profit and loss, representing the execution price of a trade versus where the market is currently trading.

Market efficiency

Market efficiency is when the price of electricity mirrors all the available information, leading to increased opportunities for buyers and sellers, with the lowest cost. In power markets, the goal is to provide reliable, affordable electricity.

Mean absolute percentage error (MAPE)

Mean absolute percentage error is a statistic used to evaluate forecast accuracy. It represents the typical error between a forecast and the observed value. The MAPE metric by definition puts disproportionate emphasis on periods on lower magnitude values, i.e. values closer to zero. When applied to demand forecasting, this is often less useful than other metrics like Root Mean Squared Error (RMSE) because more emphasis is placed on lower demand values that aren't as critical for operations or trading as high demand values. See it in action.

MISO

MISO stands for the Midwestern Independent System Operator.

Municipal utilities

Municipal utilities are nonprofit electric utilities owned by towns or cities to serve their citizens.

N

Nameplate

Nameplate is the maximum capacity of a generator.

Natural monopolies

Monopolies occur when companies face little to no competition in a field or industry. Natural monopolies often happen when there is a high barrier to entry. They are a product of market forces.

NEISO

NEISO stands for the New England Independent System Operator.

Net generation

Net generation is total generation excluding the parasitic plant load.

Node

A node is a pricing location. It can also refer to points across the grid where electricity is injected, removed, or transferred.

Non-ISO/bilateral settlements

ISO and RTO markets act as clearinghouses for entities to transact with each other. Non-ISO settlements are transactions between entities that occur outside of ISO and RTO markets and are reconciled directly between counterparties. Yes Energy solutions like PowerCore support settlements outside of ISO/RTO markets and streamline them.

Nuclear power plants

Nuclear power plants produce electricity using nuclear fission to heat water, which produces the steam that turns the turbines that turn the magnets producing electricity.

NYISO

NYISO stands for the New York Independent System Operator.

O

OASIS

This stands for Open Access Same Time Information System. OASIS is the system that provides information on transmission capacity. Transmission service is requested through OASIS as well.

Off peak

Off-peak hours are the hours during the day when the demand is the lowest. Depending on ISO definitions, this can also include weekends/holidays.

On peak

On-peak hours are the hours during the day when the demand is the highest.

Option

An option is a contract that gives the person who holds it the right to buy or sell a commodity at a certain price in a certain time frame in exchange for a premium payment.

Outages

An outage is when a piece of equipment is out of service, either as a planned or unplanned event.

P

Parasitic load

The parasitic load is the power a generator uses onsite that isn't available to the grid.

Peaking generators

Peaking generators are the generators that run during peak hours of energy demand or load. They are more expensive to operate but also have faster ramp rates than baseload generators.

Physical power market participants

These are participants who are buying or selling actual electricity; they have a physical need to use the power grid and transmission services.

PJM-ISO

This stands for the Pennsylvania, Jersey, Maryland Interconnection, the area's independent system operator/regional transmission organization.

Point to point (PTP)

Point to point is the name for spreads in ERCOT.

Power grid

The power grid is the infrastructure that allows for the delivery of electricity. The power grid is made up of generators, transformers, the transmission system, and the distribution system.

Power plant

A power plant is a facility that produces electricity from primary energy. Most power plants use generators to convert mechanical (kinetic) energy into electrical energy to power the grid. Solar power plants are different, and they use photovoltaic cells (instead of turbines) to produce electricity.

Price convergence

In power markets, price convergence would result if the real-time market ended up matching the day-ahead market exactly, with the day-ahead and real-time prices converging. Price convergence is the goal for ISOs and RTOs.

Pricing signals

The ISO balances the grid by sending pricing signals to certain pricing nodes. High pricing signals indicate that generators in that area should ramp up. Low or negative pricing signals indicate that there is too much generation in that area and generators should ramp down.

Prime mover

A prime mover is the type of equipment that drives the electric generation.

Public utilities commission (PUC)

A PUC is a regulator of electricity that aims to provide quality services with affordable rates.

Pumped storage

Pumped storage facilities generate electricity by transporting water back and forth between two reservoirs at different elevations. Water is pumped from the lower reservoir to the higher reservoir using electricity (this often takes place during low load periods, such as at night). Then, when the load is higher, the water is released from the higher reservoir to the lower one, passing through turbines in the same way it would in a hydro dam and producing additional electricity.

Q

R

Ramp rate

Ramp rate is how long it takes for a generator to increase or decrease its power output, measured in MW/min.

Real-time market

The real-time market is the market where the ISO or RTO meets the actual demand in real-time, by bringing generators on and offline.

Regional Transmission Organization (RTO)

Functionally, an RTO is the same thing as an ISO. However, FERC Order 2000 outlined specific requirements to be classified as an RTO. Many markets operated as ISOs and became RTOs after meeting FERC's requirements but kept their original names.

Risk mitigation

This is reducing the level of risk when taking a position in the market, decreasing the chances of losing a large sum of money.

Rolling blackouts

A rolling blackout is when a system operator takes distribution lines out of service to help balance supply and demand during extreme demand or extreme capacity shortage.

S

Security-constrained economic dispatch (SCED)

SCED is the mathematical model used to create the most economic dispatch of generation while also accounting for operation limitations (i.e. congestion, ramp rates, outages, etc.).

Shadow price

The shadow price is the cost of relieving a constraint by one megawatt.

Shadow settlements

This is a parallel settlement process used to independently calculate and validate market settlement results. Shadow settlements are a core capability for operating in and validating results in new markets, such SPP’s Markets+ and CAISO’s EDAM. Customers need assurance that transactions are settled properly.

Shift factor

A shift factor is a measure of how much a change in power injection at a given location affects the flow on a transmission constraint.

Sink

The point on the transmission system where electric energy is withdrawn. This is essentially where the energy is going.

Solar farms (photovoltaics)

Solar farms produce electricity by converting photons from sunlight into electricity. Solar panels contain cells made up of semiconductor material. When the sun's photons strike the panel, they free electrons in the semiconductor and create an electric current, generating electricity.

Source

The point on the transmission system where electric energy is injected. This is essentially where the energy comes from.

Spark/dark/quark/bark/crack spread

The Southwest Power Pool is the area's independent system operator/regional transmission organization. See the SPP map.

Spreads

Spreads are similar to virtuals, but instead of bidding on a single price node, you are bidding on the difference in price between two price nodes. The transactions are between two price nodes on the grid - the source and sink. Spreads are bid into the day-ahead market and settled in the real-time market.

Spread trading

Essentially, spreads are bids on whether the congestion cost will be higher or lower in the day-ahead market than the real-time market. Spreads are only an option in PJM (up to congestion) and ERCOT (point to point).

Step-up and step-down transformers

Transformers use alternating current and iron coils to increase or decrease the voltage of electricity to prepare it for transmission lines or for delivery to the end user.

Summer/winter capacity

This is the maximum capacity of a generator in the summer or winter. This is based on the actual generation, not the ideal conditions.

Supply and demand

This is the economic commodity relationship between the volume the producers want to sell and the quantity consumers wish to buy.

Steam turbines

Steam turbines use fuel to heat liquid, transforming it into steam. The steam rotates a turbine connected to an electromagnetic generator that produces electricity.

System operators

System operators manage the power grid from computer consoles in a control center. In competitive markets, system operators are the ISOs or RTOS. In regulated markets, the system operators can be vertically integrated utilities, municipal utilities, and federal power agencies.

T

Transformer

A transformer is a piece of equipment that converts energy from one voltage to another.

Transmission

Transmission is the use of high-voltage power lines to transport electricity across long distances. The transmission system is analogous to the US highway system.

Transmission congestion contract (TCC)

TCC is the name for financial transmission rights in NYISO.

Transmission congestion right (TCR)

TCR is the name for financial transmission rights in SPP.

Transmission constraint

A transmission constraint occurs when too much power could flow across a transmission line if system conditions quickly change (unplanned transmission outage, generation trips, etc.).

Transmission line

Transmission lines are power lines that carry electricity long distances at high voltages.

Transmission losses

Transmission losses refer to the power that is lost because of dissipated heat when power flows through a transmission line.

U

Up to congestion (UTC)

UTC is the name for spreads in PJM.

W

Western market expansion

Western markets are expanding with SPP’s Markets+ and CAISO’s EDAM.

Wind turbines

Wind turbines use natural wind to produce electricity. The wind spins the blades on the turbine around a rotor, spinning the generator and producing electricity.

Power Markets Glossary

A

B

Bus

C

D

E