by ROCKMAN » Fri 24 Jan 2014, 10:10:31
Robert - Actually they can: electricity (both power and energy) is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use supply and demand principles to set the price. Long-term trades are contracts similar to power purchase agreements and generally considered private bi-lateral transactions between counterparties. Wholesale transactions (bids and offers) in electricity are typically cleared and settled by the market operator or a special-purpose independent entity charged exclusively with that function. Market operators do not clear trades but often require knowledge of the trade in order to maintain generation and load balance. The commodities within an electric market generally consist of two types: power and energy. Power is the metered net electrical transfer rate at any given moment and is measured in megawatts (MW). Energy is electricity that flows through a metered point for a given period and is measured in megawatt hours (MWh). Markets for energy-related commodities trade net generation output for a number of intervals usually in increments of 5, 15 and 60 minutes. Markets for power-related commodities required and managed by (and paid for by) market operators to ensure reliability, are considered ancillary services and include such names as spinning reserve, non-spinning reserve, operating reserves, responsive reserve, regulation up, regulation down, and installed capacity.
And it's going on in S Texas to some degree today: a significant portion of the grid there is supplied by wind. That alt component of the supply does have some impact on the e- futures market. If Texas continues expanding wind that component will eventually be a major trading factor. Imagine how 60 minute future could flip when a windy front moves thru the area. Or if they get hit with a dead calm that often happens in August.