In terms of economy, electricity is known to be the economic good or service that is a commodity that is capable of selling and trading. Generally in the form of financial electricity is known for short term trading and the system of enabling purchases through offers to buy and sell the energy. To set the price, the bids and offers demand the use of supply and demand principles. Similar to power purchase agreements long term trades are contrasted and between the counterparties, the private bi literal transactions are most generally committed. In the electricity process, whole transactions are typically cleared and settled by the market operators. To maintain the generation and load balance, market operators often require the knowledge of the trade instead of clearing the trades.
The market operators make out of the proper Electric Plans to lead with the proper trading of the generation. The electric market contains two types of commodities like power and energy. The metered flow of electricity is measured with megawatt-hours. The flow of electricity is known to be the energy that is monitored for a given period. The electrical transfer of power is measured with megawatts. To ensure the reliability, the power-related commodities of markets required and should be managed by the market operators. The active trading of electricity futures and options that are the markets for the transmission and electricity derivatives. To restructure the electric power system these markets are developed around the world. With the reconstruction of the natural gas markets this process often gone with the parallel issues.
Background of energy markets:
The early initiation of the energy markets and something that is moved from the public sector to the private sector to the electric power system has a location in Chile in 1980. With the Chicago boys, other market-oriented reforms associated with parallel actions. In bringing the rationality and transparency to power pricing is through the Chilean model was generally perceived successfully. To assure the system reliability in the reserved services with improving the structure of the payments for the units is held over. The introduction of the market concept in Argentina has one of the principal purposes to privatize with the existing assets of generation. In the year 1990, the important event of electricity markets took place when the United Kingdom’s electricity supply industry is privatized by Margaret Thatcher. To serve its customers, the standard vertically integrated electric utility model is authorized in the United States worked extremely for decades. Depend on the reliable supply of electricity, the transportation of electricity increased to a greater distance. The interconnections are developed wide area synchronous grid. Relatively grew and general transactions are scheduled well in advance. The united state’s policymakers in the last decade of the twentieth century asserted that the ultimate experience of the deregulation occurs in the electric power industry. And the policymakers established the electric power industry with independent system operators and then the regional transmission organization that is commonly known as ISOs and RTO s. In a competitive environment, a hugely increased number of transactions are held and framed the way to handle the environment through the independent system operators and the regional transmission organization.