The electricity supplier is responsible for purchasing electricity from the wholesale market, selling it to customers and billing them for the electricity consumed. The distribution network delivers the electricity to the premises of customers – domestic or commercial/industrial. The transmission network feeds the low-voltage distribution network via a set of connection points known as Grid Supply Points (GSP). Figure 1 provides a simplified view of the energy market -Įlectricity Market: Electricity is generated in power plants and is delivered into the high-voltage transmission network. We begin by taking a brief look at the workings of the energy market. Energy trading, for example, is a vast subject on its own and this post does not attempt to cover all its complexities rather it introduces only those concepts of energy trading which help us in understanding the energy settlement process. This post provides a simplified view of the energy market and the settlement process in order to explain the key principles once the basic framework is understood, it is easier to appreciate the more difficult concepts. The analysis is primarily based on the UK energy market however the key principles of energy settlement are the same in any mature, de-regulated energy market. We will then look at how the settlement process works in the electricity and gas markets. We will begin with a brief introduction to the energy market and the principal participants. In this post we will analyse energy settlements, for both gas and power. Energy settlement is the process of reconciling the difference between the energy purchased by energy suppliers from generators /producers and the energy sold to the customers.
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