Electricity Market Basics: Day-Ahead & Real-Time Trading

This document provides a comprehensive overview of the basic composition and trading mechanisms of electricity markets, focusing on the day-ahead and real-time markets. It explains the role of medium and long-term contract markets in stabilizing spot prices and preventing market power abuse. The day-ahead market determines unit commitment and generation for the next day through centralized optimization, using 15-minute trading periods. The real-time market addresses forecast deviations and ensures power balance close to actual operation. Key concepts include system marginal price, zonal marginal price, and locational marginal price, which reflect transmission constraints and congestion. The document also covers bidding strategies, such as ascending multi-segment bidding, and the necessity of spot markets for price discovery and renewable energy integration. Overall, it serves as a foundational guide for understanding electricity market operations and pricing mechanisms.