Solar Power: The Killer App

Solar power reduces electricity prices. As more solar is added to deregulated power grids, power prices fall lower. The secret sauce is the markets.

Deregulated power markets are invisible to many Americans, yet every few minutes they set the price for much of their electric power. There are ten separate power markets currently operating in the North America. According to the ISO/RTO Council, they serve approximately two-thirds of electricity consumers in the United States and more than half of all consumers in Canada.

While each market works differently, they all set the price for electric power using sophisticated auctions, which repeat every few minutes, 24 hours a day, 7 days a week. Market managers forecast expected demand for energy and generators, including solar power producers, bid in prices to meet that demand.

Typically, generators bid in based on their production costs. So if an independent power producer owns a power plant, they will carefully examine their production costs and bid a price slightly higher than those costs. Any amount they receive over their production cost creates gross margin, which can be used to pay other operating and indirect costs.

via Solar Power: The Killer App.

Categories: Electricity, Energy, Policy