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Merit order is a way of ranking available sources of energy, especially electrical generation, based on ascending order of price and sometimes pollution. Learn how renewable energy affects merit order, how economic dispatch minimizes the cost of production of electricity, and how the merit order curve is derived.
Learn what the merit order curve is and how it determines the clearing price and volume in power exchange markets. See examples of how renewables, nuclear, coal and gas affect the curve and the market prices.
A fundamental building block of the model is the merit order curve, which serves as the short run supply curve of electricity. The demand for electricity, in the short-run, is usually assumed to be perfectly price-inelastic and is therefore represented by a vertical line.
This mechanism is often illustrated with the “merit order curve”, a chart depicting the power generation costs of the existing plant fleet. All generators receive and all consumers pay the same price.
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? The merit order is a fundamental concept in electricity markets, playing a vital role in determining the sequence in which different energy sources are utilized to meet demand.
May 29, 2024 · Having a merit order curve and assuming demand at a given level, we are able to determine which power plant sets the marginal cost and assign the price of energy that must occur in the market for that power plant to want to produce 1 MWh.
