Analysis of Global Power Market
Analysis of Global Power Market
Power Market Pricing
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Due to the limitations in power storage, in liberalised and centrally organised electricity markets, the wholesale price of power
mainly depends on the dynamics of the immediate supply and demand situation. The price floor is generally determined by the
marginal costs of all the power plants necessary to cover the demand that arrives in a market at any given time. The final price is
then related to the competition intensity within the region.
Supply of Electricity
Demand of Electricity
The Prices of Fuels
The Price of Emissions
Certificates
Drivers of the Electricity Wholesale Prices
The supply of electricity mainly refers to the available generation capacity of power producers. With the
increase in available generation capacity, the wholesale price of electricity will decrease, at the same time,
the utilisation rate of available generation capacity will also reduce. However, due to the costly electricity
storage, the wholesale price of electricity may at least cover the marginal cost of the power producers when
the demand is met.
The demand of electricity mainly refers to the load required at any relevant point in time. With the increase in
electricity demand, the wholesale price of electricity may also increase. The demand for electricity has peak
and valley time within a day and seasonality due to the cooling and heating requirement in summer and
winter.
Although renewable energy is the trend of power generation, conventional power generation plants still take
a large part of power generation in the world. As a result, the variation of the fuel prices will affect the cost of
power generation plants and reflect on the variation in the electricity wholesale price.
In order to control the emission level, emissions certificates and emissions trading schemes have been
introduced in some market. For conventional power plants, the price of emissions certificates is the
additional cost once the emission reaches the allowance. Additionally, the price of emissions certificates is
the opportunity cost for the electricity supplier, indicating that a rational electricity supplier will only produce
an MWh of electricity if the profit from electricity generation is at least as high as the revenue that would be
garnered from selling the certificates in the market. Therefore, the price of emissions certificates will have an
influence on the electricity wholesale price.
FROST &
SULLIVAN
Source: Frost & Sullivan
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