In this lesson we learned about the backbone of modern electricity markets - the day-ahead and real-time electricity auctions and locational marginal pricing. These two constructs are connected by the two-settlement payment system, which defines a generator's total payment based on the amounts that it is cleared to produce in the day-ahead and real-time energy markets and the LMPs in each of those markets. While the system described in this lesson originated in the PJM electricity market in the United States, it has been adopted in one form or another by just about every other electricity market in North America, particularly the Regional Transmission Organization (RTO) markets operating in the United States. We also learned how to calculate LMPs in our two-node and three-node networks. These networks are simple enough that we can calculate the LMPs by hand, but the same principles are followed by RTOs to calculate LMPs on networks involving tens of thousands of pricing points.
Reminder - Complete all of the Lesson 8 tasks!
You have reached the end of Lesson 8! Double-check the to-do list on the Lesson 8 Introduction page to make sure you have completed all of the activities listed there before you begin Lesson 9.