Blog Post

How Does Electricity Trading Work?

Paul Fox • Jul 29, 2018

The supply of electricity to UK businesses and homes is a complicated process but put simply electricity is generated and used in real-time with the trick being to balance the generation to meet the required supply demand. In this article we explain how electricity trading works.

How it works

Although consumption, and therefore generation, is a continuous process electricity is grouped into half hourly time frames for the purpose of settlement calculations and trading.

So in an ideal world this is how its supposed to work. Suppliers will forecast the electricity consumption of their customers for each half hour period, the generators are then contracted to produce those delivered volumes to meet the expected demand. In turn the electricity suppliers are then expected to use the amount of volume forecasted and generated.

Unfortunately this ideal world does not exist and therefore a number of variables alter either the amount of electricity used compared to that forecasted/contracted or the amount contracted is unable to be generated.

Therefore National Grid monitor this process in real-time to endeavour that demand always meets supply by taking a series of corrective steps, these steps are called Bids and Offers.

Offer – is an instruction from a generator, who is not operating at full demand capacity, to increase their demand output in that Half Hour or is an instruction from a supplier to reduce their required demand within that half hour

Bid – is basically the opposite, an instruction from a generator to reduce their current generation output or an instruction from a supplier to increase their required demand.

Looking to enter the UK energy market? Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence.

Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help.