The variable operating cost of electric power generators is a key factor in determining which units a power system operates (or “dispatches”) to meet the demand for electricity. Other things being equal, plants with the lowest variable operating costs are generally dispatched first, and plants with higher variable operating costs are brought on line sequentially as electricity demand increases. 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.

Electric system operators strive to have sufficient generating capacity available to meet the expected demand for electricity, plus a “reserve margin” to account for unexpected events (such as abnormally hot weather). The order in which these units are brought on line is primarily a function of variable cost. The two vertical lines on the chart represent different electricity demand situations; generators falling to the left of the line for each situation would supply electricity at that time.

via Electric generator dispatch depends on system demand and the relative cost of operation – Today in Energy – U.S. Energy Information Administration (EIA).