Power markets Coursework Example | Topics and Well Written Essays - 1500 words

Power markets - Coursework Example This one-hour-in-advance arrangement for the provision of electricity functions as cut-off as after that time, no arrangement can be contracted to supply electricity; it is called as Gate Closure. Generators produce electricity as per the demanded capacity during the contracted half-hour for usage by the suppliers (ELEXON, 2012). Nevertheless, in the real-time of half-hour, possibility exists for suppliers estimating their electricity needs wrongly or failure on the part of generator to generate the settled electricity or a glitch could emerge in the transportation of electricity. It necessitates the actual time management for smooth functioning of the arrangement, which is played by the System Operator, the National Grid (ELEXON, 2012). Those generators having capacity to generate extra electricity other than the half-hour demand of the supplier can do so by making available the additional volume to the System Operator and fix a price they expect for the extra volume. Likewise, a Generator can decrease the volume of electricity generated and can fix a price for decreasing it. Likewise, suppliers not having any shortage of electricity can offer to decrease their demand to facilitate availability of extra electricity to the System Operator and can fix the price they expect for that. On the same length, suppliers can convey to the System Operator their demand for a pre-determined price. Such conversations between the stakeholders in technical terms are called Bids and Offers. An Offer is made to increase electricity generation or decrease demand for it while a Bid is made to decrease generation or increase demand (ELEXON, 2009). The System Operator manages supply and demand in each half an hour in real-time by accepting Bids or Offers conditional to an increase or decrease in electricity generation to fulfil demand. Later, metered volumes are measured for the half hour from Generators