What is an Electricity Market?
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What is an Electricity Market?


Electricity. Did you ever wonder how the
exact amount of electricity you need is available
in real time, each day? Think about the electricity used as you and your family
get ready in the morning. While you’re away, a
programmable or smart thermostat can adjust your home temperature to lower your electricity use. Energy goes up again when
you return home at night. We’re all connected to
the electricity grid. Energy is delivered to us
from electricity generators, over wires, and into our homes, and this is all managed
through an electricity market. It’s bought and sold like many
other types of commodities, say the market for apples. Just like a variety of apples
from many different farms and orchards are bought
and sold at a market, there are also a lot of participants in the electricity market, which helps make pricing competitive. It cost-effectively aligns the ability to provide electricity, or supply, with our need for electricity, or demand. And that demand varies throughout the day. One of the responsibilities
of Ontario’s IESO, or Independent Electricity
System Operator, is to watch patterns of energy consumption across the province,
and use them to forecast the amount of electricity
we’ll need in any given hour. Various electricity generators
use the IESO forecast to plan how much electricity
they can provide, and at what cost. They need to factor in things
like equipment maintenance, and available fuel sources. Because that supply of resources varies, and our demand for electricity varies, different offers come to market every five minutes, 24 hours a day. And just as various apple growers come to the market, with
the amount of apples they can offer at their best price, the generators of electricity
come to the market with the amount of energy they can offer at their best price. And that’s how they compete
to provide that electricity. Then, the IESO, in order to meet demand, takes the lowest prices offered, until our need for electricity is met. Running the electricity market in this way allows the IESO to operate
the electricity grid cost-effectively, and ensures
that a reliable supply of electricity is provided to us all whenever it’s needed. And all of that gives us this.

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