# What is merit order curve?

## What is merit order curve?

The supply curve, the so called merit order, is derived by ordering the supplier bids according to ascending marginal cost. The intersection of the demand curve with the merit- order defines the market clearing price i.e. the electricity spot market price.

## What is a dispatch curve?

This sequence can be seen in an electricity supply curve—also referred to as a dispatch curve—that represents the order in which units are dispatched to meet the demand.

What is the merit order in electricity?

In the energy industry, the term ‘merit order’ describes the sequence in which power plants are designated to deliver power, with the aim of economically optimizing the electricity supply. The merit order is based on the lowest marginal costs.

### What is merit order in electricity market?

The “merit order effect” describes the mechanism by which the market price is set. In the energy only market, the merit order effect describes the lowering of power prices at the electricity exchange due to an increased supply of renewable energies.

### What does capacity factor tell us?

Capacity factor is the measure of how often a power plant runs for a specific period of time. It’s expressed as a percentage and calculated by dividing the actual unit electricity output by the maximum possible output. This ratio is important because it indicates how fully a unit’s capacity is used.

What affects capacity factor?

Wind farms are variable, due to the natural variability of the wind. For a wind farm, the capacity factor is determined by the availability of wind, the swept area of the turbine and the size of the generator. Transmission line capacity and electricity demand also affect the capacity factor.

#### What is electricity dispatch?

Since electricity cannot be stored in power lines, the entity operating the power grid must continuously adjust the output of its power plants to meet electricity demand. This process is called the “dispatch” of power plants.

#### What is the need for economic dispatch?

The fundamental purpose of economic dispatch is to reduce consumers’ electricity costs. “Efficient dispatch” would take the dispatch process off this path and increase consumers electricity costs – for benefits that may not be large enough to offset these additional costs.

What is out of merit?

If a generating unit is required to meet demand then it’s described as ‘in merit’, if it is not required at any particular point in time then it’s ‘out of merit’ – there’s no point in suppliers paying for another power station, for example, to start generating if demand is already being met.

## What is load following in electricity?

Load Following is a strategy that allows you to lock in a percentage of your energy through one or more hedges. With this approach, you can continue stacking fixed percentages, up to a 100% fixed rate. The remaining percentage is variable, meaning it follows the market.

## How is electricity dispatched in a competitive market system?

The AESO’s system controllers dispatch the lowest-priced offers from the bottom of the merit order first, and move up towards the higher-priced offers until all electricity required to meet demand has been dispatched. The last offer dispatched to meet demand sets the system marginal price (SMP) for electricity.

What is the merit order effect?

This Factsheet is part of the following Dossiers ›. The “merit order effect” describes the mechanism by which the market price is set. In the energy only market, the merit order effect describes the lowering of power prices at the electricity exchange due to an increased supply of renewable energies.

### What is the merit order model of electricity price development?

The merit order model is a static description model that is well suited for representing short-term electricity price formation. Calculating the long-term development of electricity prices, however, requires a market model that takes long-term effects into account.

### What is the Merit Order of power generation?

The merit order is separate from the fixed costs associated with a power generation technology. According to the merit order, power plants that continuously produce electricity at very low prices are the first to be called upon to supply power. Power plants with higher marginal costs are subsequently added until demand is met.

How to estimate the merit-order effect?

Since electricity demand and renewable electricity generation vary on an hourly basis, an estimation of the actual value of the merit-order effect is far more complex than the estimation of the market value. Therefore the analysis is carried out using the PowerACE Cluster System which is able to simulate hourly spot market prices. 2. Methodology