In economic terms, electricity (both power and energy) is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use supply and demand principles to set the price. Long-term trades are contracts similar to power purchase agreements and generally considered private bi-lateral transactions between counterparties.
Wholesale transactions (bids and offers) in electricity are typically cleared and settled by the market operator or a special-purpose independent entity charged exclusively with that function. Market operators do not clear trades but often require knowledge of the trade in order to maintain generation and load balance. The commodities within an electric market generally consist of two types: power and energy. Power is the metered net electrical transfer rate at any given moment and is measured in megawatts (MW). Energy is electricity that flows through a metered point for a given period and is measured in megawatt hours (MWh).
Markets for energy related commodities are net generation output for a number of intervals usually in increments of 5, 15 and 60 minutes. Markets for power related commodities required by, managed by (and paid for by) market operators to ensure reliability, are considered ancillary services and include such names as spinning reserve, non-spinning reserve, operating reserves, responsive reserve, regulation up, regulation down, and installed capacity.
In addition, for most major operators, there are markets for transmission congestion and electricity derivatives, such as electricity futures and options, which are actively traded. These markets developed as a result of the restructuring of electric power systems around the world. This process has often gone on in parallel with the restructuring of natural gas markets.
Read more about Electricity Market: History, Nature of The Market, Wholesale Electricity Market, Retail Electricity Market, Electricity Market Experience
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—Anton Pavlovich Chekhov (1860–1904)
“To throw obstacles in the way of a complete education is like putting out the eyes; to deny the rights of property is like cutting off the hands. To refuse political equality is like robbing the ostracized of all self-respect, of credit in the market place, of recompense in the world of work, of a voice in choosing those who make and administer the law, a choice in the jury before whom they are tried, and in the judge who decides their punishment.”
—Elizabeth Cady Stanton (1815–1902)