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I am not familiar with the German electricity market but if it operates according to the US norm (day ahead bidding etc). In simplified terms, the transmission system operator is basically receiving the bids for the quantity and cost for each hour of the next day by all producers who wish to bid and then assigns the dispatch based on the lowest cost producer until demand is met. All producers who dispatch get the marginal price of the last producer that dispatched.

This is effectively what allows the merit order effect to occur.

As a result even if the last producer only produced one kwh (theoretically) then that is the price of the system - as a result the cost of gas is very very relevant to the wholesale pricing of electricity as usually the gas plants are the swing producers.

Orthodoxy is not a religion.

by BalkanIdentity (balkanid _ at _ google.com) on Thu Jul 4th, 2013 at 02:43:00 AM EST
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