Wholesale Electricity Market.
Wholesale Electricity Markets Explained
The wholesale electricity market is a critical component of the overall energy landscape. It refers to the buying and selling of power between generators and resellers. These resale entities will generally buy electricity through markets or through contracts between individual buyers or sellers. In some cases, utilities may own generation and sell directly to end-use customers. In other cases, retail energy suppliers buy energy from the wholesale market and resell it to end-users in the retail market.
As deregulation has swept across the country, wholesale electric markets have become increasingly important in providing a mechanism for retailers to procure electricity. This is especially true in states that have opened up their retail energy markets to competition. Retailers can now purchase power at wholesale prices and pass those savings on to consumers.
The wholesale electricity market is constantly evolving, with new players and products entering the space. It’s important for consumers to understand how this market works and the role it plays in their energy choices.
Electricity generation is the process of producing electricity and is commonly expressed in kilowatt-hours (kWh) or megawatt-hours (MWh). Electricity generation is the first step in the electric power supply chain. The most common forms of electrical generation are natural gas, coal, nuclear, hydro, wind, solar, and biomass.
Electricity transmission owners transport electricity at a very high voltage from the electricity generation plants to the electric utility companies. In many deregulated states transmission lines are privately owned. In regulated states, transmission lines are often owned by public utility companies. Transmission is the second step of the power supply chain.
Electric utilities are public companies responsible for delivering power over locally-owned utility lines to end-use consumers. In regulated states, electric utilities often own generation plants and transmission lines. In deregulated states, electric utilities are simply involved in the local delivery of power and customer billing.
Retail Energy Suppliers
In deregulated energy states, retail energy providers purchase electricity from the wholesale market and resell it to their end-use consumers. In these states, retail energy suppliers do not own transmission lines or local delivery lines. They are simply involved in the financial transaction of the sale of energy. In some cases, retail energy suppliers might also own generation plants.
Energy brokers also exist in the retail markets by helping customers negotiate the purchase of electricity or natural gas with retail suppliers.