Merit order

Making power can cost different amounts of money.

Some ways to make power are very cheap. We use the cheapest ways first. This helps keep costs low for everyone.

Wind and sun power are very cheap. They do not need to buy fuel. This helps lower the price of power.

Other ways to make power cost more. These ways are used when we need extra help.

Sometimes, people want to keep the air clean. They pick ways that do not make much smoke.

It is a smart way to run things. It helps us use power in a good way.

How do we decide which power plants to use? We use a system called merit order. This is a way to rank power sources by their cost.

We start with the cheapest sources first. These are often called baseload power. This helps keep the total cost of electricity low. This set of steps is called economic dispatch. It means we pick the best way to meet demand.

Wind and solar power are very helpful here. They have very low marginal costs. This means it costs very little to make more power from them. They do not need to buy fuel to work. Because they are cheap, companies often buy from them first. This can lower the price of power for everyone. In Germany, solar power helped lower prices by 10% on average.

Sometimes, we must think about more than just money. We also look at pollution. This is called environmental dispatch. In this way, we pick sources that keep the air cleaner. We might also use more expensive plants if the power lines are too full. This keeps the system safe and steady.

The merit order is a smart way to rank energy sources. It helps decide which power plants should run first to make electricity. This ranking is usually based on the price of each source. It also looks at things like pollution and how much energy can be made. By using this system, managers can meet the world's demand for power. This process is a very important part of how our electrical grids work.

This system works through a method called economic dispatch. First, managers look for the lowest marginal costs. Marginal cost is the cost to produce one more unit of energy. The plants with the lowest costs are brought online first. This is often called baseload power. As more power is needed, plants with higher costs are turned on. This step-by-step way of working keeps the total cost of electricity low.

History shows how this system has changed with new technology. In 2005, the US Energy Policy Act defined economic dispatch. It described using plants at the lowest cost to serve people reliably. Researchers have also studied how this works in different countries. For example, a study by the Fraunhofer Institute ISI looked at Germany. They found that wind power saves German consumers about €5 billion every year.

There are many interesting facts about how renewables change the order. Wind and solar energy have very low marginal costs. This is because they do not need to pay for fuel. In Germany, solar power reduced electricity prices by 10% on average. Sometimes, it even dropped prices by 40% in the early afternoon. Between 2008 and 2012, adding renewables lowered prices by about 0.11 to 0.13 cents per kilowatt-hour.

We can also use this system to protect our air. This is called environmental dispatch. In this version, managers try to minimize pollution along with costs. They use special computer tools to solve these hard problems. Some tools use methods like neural networks or even a "bees algorithm." These tools help balance the need for power with the need for clean air. This makes the whole energy system better for everyone.

The merit order is a systematic method for ranking available energy sources. This ranking is used to decide which power plants should generate electricity first. It is primarily based on ascending order of price. This price often reflects the short-run marginal cost of production. Marginal cost is the cost of producing one additional unit of energy. Sometimes, the ranking also considers the amount of energy available and the level of pollution produced. This system ensures that the most efficient energy sources are used to meet the electrical demand of a population.

To manage this ranking, grid operators use a process called economic dispatch. This is the short-term determination of the best output for many different electricity facilities. The goal is to meet the system load at the lowest possible cost. This must be done while following transmission and operational constraints. In a centralized management scheme, plants with the lowest marginal costs are brought online first. These are often referred to as baseload power supplies. As demand grows, plants with higher marginal costs are brought online last. This specific method of dispatching power minimizes the total cost of electricity production.

There are different ways to approach this dispatch problem. Economic dispatch focuses mainly on minimizing fuel costs and power loss. However, managers may also use environmental dispatch. This version adds extra considerations to reduce pollution. In environmental dispatch, the model is optimized to minimize pollutant emissions alongside costs. This makes the problem much more complex. To solve these problems, engineers use specialized computer software. Some advanced methods include neural networks or a modified bees algorithm. These tools help balance the need for electricity with the need for clean air.

History shows how laws and research have shaped these energy systems. The US Energy Policy Act of 2005 provided a formal definition for economic dispatch. It described it as operating facilities at the lowest cost to serve consumers reliably. Research has also looked at how different technologies change the merit order. For example, a study by the Fraunhofer Institute ISI examined the German energy market. They found that wind power saves German consumers about €5 billion every year. This research helps us understand how different energy sources interact within a national grid.

Renewable energy sources like wind and solar have a major effect on the merit order. These sources have very low marginal costs because they do not require fuel. Their main costs are only for operations and maintenance. Because they are inexpensive, transmission companies often buy from them first. This can lower the average price of electricity. In Germany, solar power reduced electricity prices on the exchange by 10% on average. During the early afternoon, it sometimes reduced prices by as much as 40%. Between 2008 and 2012, every additional GWh of renewables reduced the price by 0.11 to 0.13 cents per kilowatt-hour.

However, there are also challenges when using renewables in the merit order. Wind and solar are intermittent, meaning they do not always produce power when needed. This can lead to the "duck curve," where solar is most abundant at noon but demand peaks in the late afternoon. Also, using renewables can increase certain grid costs. In Germany, consumers pay more for renewable energy through specific acts. For instance, the average price in Germany increased to 26 cents per kilowatt-hour. These costs include new transmission lines and storage needs. These extra costs are often combined with source costs at the consumer level.

Mathematically, the economic dispatch problem is a way to maximize economic welfare. It involves complex equations with different nodes, or buses, in a network. Engineers must balance the rate of generation at each bus with the rate of consumption. They must also account for power losses in the branches of the network. They use a "Slack bus" to help manage these calculations. Because these equations are nonlinear and difficult to solve, many use a simpler linear model. This is called a DC power flow model. This math helps ensure the entire electrical system stays stable and efficient.