See also R Street’s Electricity FAQ, as well as the following entries in R Street’s Electricity 101 series:
- Federal Power Act and organized electricity markets
- Physical characteristics of energy
- Economic characteristics of electricity
- Traditionally regulated vs. competitive wholesale markets
- Types of organized electricity markets
Ancillary services: Services necessary to support the reliable transmission of electricity to loads. These services include operating reserves (i.e., spinning reserves and supplemental reserves), black start, reactive power, frequency response and frequency regulation. Such services complement bulk energy service.
Balancing authority (BA): An entity responsible for integrating resource plans in advance. A BA maintains supply-demand balance within a given transmission area and supports interconnection frequency in real time.
Baseload: The minimum amount of electric power delivered or required over a given period of time. For example, if electricity demand fluctuates between 25,000 megawatts (MW) and 60,000 MW per-year on a given system, then 25,000 MW would be the annual baseload level. This means the system could operate 25,000 MW of generation to run constantly throughout the year.
Black start: The process of restoring a power station to operation without relying on power from the transmission system. Black-start capability is imperative in the event of a blackout, when most generators require a level of external power from the transmission system to begin operations.
Blackout: Complete loss of electric service in a given area. A system operator may induce a localized blackout under emergency conditions in order to preserve the integrity of the full transmission system. This procedure uses rotating blackouts, where service is interrupted typically for 20-30 minutes in one area, then put back into service while another area is interrupted. In contrast, cascading blackouts cause uncontrolled loss of electric service across a vast area.
Brownout: Also known as voltage reduction, or an emergency action by a system operator to reduce voltage in order to maintain transmission-system integrity. The term “brownout” is derived from the dimmed lights that voltage reductions cause.
Capacity: The maximum amount of power a generator or transmission or distribution facility can safely produce or transfer. “Nameplate” capacity refers to the maximum rated power level of an electrical device, but often certain conditions (e.g., temperature) reduce the actual capacity of a facility.
Capacity market (electricity): A long-term organized auction that procures a defined level of generation capacity within an electricity system. Capacity markets are used to ensure there are enough resources to meet peak demand. The amount procured is determined by estimated peak demand plus a reserve margin needed in the event of a system contingency. Demand-side resources can participate on either the supply side (i.e., emulating a power plant) or on the demand side (i.e., reducing the amount of capacity that load-serving entities are obligated to purchase).
Cascading: The uncontrolled successive loss of system elements caused by a single incident. This can result in widespread electric-service interruption. For example, on Aug. 14, 2003, the North American power grid experienced its largest blackout ever, which began with the loss of a generating facility in northeast Ohio. This induced an uncontrolled cascade that affected about 50 million people.
Cogeneration: Production of electricity from heat, steam or other forms of energy produced as a byproduct of another process. This is commonly used by industrial facilities, such as paper mills and chemical plants, which can more efficiently and cost-effectively produce most of their electricity needs on-site.
Demand: The rate that electric energy is delivered or consumed by an electric system or part of a system, either at a given moment or averaged over a period of time. This is usually expressed in kilowatts (kW), megawatts (MW) or gigawatts (GW).
Demand response (DR): A reduction in demand by end-use customers relative to their normal consumption pattern. This occurs in response to a signal or action from the system operator. Customers receive compensation in exchange for voluntarily offering to reduce demand.
Demand-side management (DSM): Activities or programs that reduce the amount or shift the timing of customer demand. For example, some programs shift use of appliances from peak-demand periods to off-peak times of the day. This can relieve strain on the system and reduce the need to build seldom-used peaking power plants. Other DSM programs, such as weatherization and high-efficiency lighting, can reduce overall demand. This can defer or avoid the need to build power plants that serve a variety of roles, including baseload.
Dispatch: The inclusion of a supply or demand resource’s output onto the transmission system. To ensure supply and demand balance, the system operator sends dispatch instructions to individual power-plant operators and demand-response providers. Operators rank resources based on cost. They dispatch the least-cost resources to minimize the cost of operating the electricity system.
Dispatch order: A set of dispatch instructions
Distributed energy resources (DER): Small, customer-sited resources that can generate electricity or reduce demand. These include a family of supply technologies, such as distributed solar photovoltaics and industrial cogeneration, as well as demand response.
Emergency: An abnormal system condition that requires immediate action to prevent or limit the failure of transmission facilities or generation supply that could undermine the reliable operation of the electric system. For example, if a system is short resources in a given area, it may call on an interconnected neighboring system to provide emergency assistance.
Energy: The generation or consumption of electric power over a period of time, usually expressed in kilowatt hours (kWh), megawatt hours (MWh) or gigawatt hours (GWh), in contrast with power or capacity, which are measured in kilowatts (kW), megawatts (MW) or gigawatts (GW).
Energy market (electricity): A short-term organized market for electric energy that operates one day ahead of delivery and again in real time, to account for any discrepancies between the two. Energy markets use locational marginal pricing (LMP) to reflect the marginal cost to serve load at specific locations on the grid.
Federal Energy Regulatory Commission (FERC): A federal agency, renamed from the Federal Power Commission in 1977, created to regulate interstate wholesale sales of natural gas and electricity at “just and reasonable” rates, among other responsibilities.
Firm service: The portion of transmission service or demand that must be served unless system reliability is threatened. Firm service is a more expensive service than interruptible service (sometime called non-firm service), where service is provided on an as-available basis. This means that interruptible service is curtailed more frequently under less severe circumstances (i.e., firm takes priority over interruptible service).
Frequency response: The sum of the change in demand and generation, divided by the change in frequency (expressed in megawatts per 0.1 hertz). This also refers to the ability of a system or its elements to respond to a change in system frequency.
Grid operator: See system operator.
Independent power producer (IPP): An entity that owns or operates a generator that is not included in an electric utility’s rate base. IPPs are also referred to as merchants. IPPs are most prevalent in restructured areas, which rely on their presence to provide grid services, but also exist in regulated states.
Independent system operator (ISO): An entity that controls and administers nondiscriminatory access to a transmission system, independent from the owners of the facilities. ISOs grew out of FERC Orders Nos. 888 and 889, which suggested the concept as a means for former power pools to provide non-discriminatory transmission access.
Integrated resource planning (IRP): Long-term, least-cost planning of supply and demand-side resources used by regulated, vertically integrated utilities. In recent years, IRP has been used as a cost and risk-minimizing tool.
Interconnection: An area where the operation of the bulk power system is synchronized such that the failure of one or more components may adversely affect reliable service or operations of any customer or resource provider in the system. The lower 48 states contain three interconnections: Eastern, Western and the Electric Reliability Council of Texas.
Interruptible service: see Firm service.
Kinetic energy: The energy possessed by a body by virtue of being in motion. As applied to electricity generation, wind and solar radiation convert kinetic energy directly into electrical energy.
Load-serving entity (LSE): An organization responsible for securing the energy and transmission service to serve electricity demand and energy requirements of its end-use customers. This could be a vertically integrated utility in a regulated state or an entity that exclusively buys electric service at wholesale and resells it to end-use customers in restructured states.
Load shedding: The process of deliberately removing demand areas from a power system in response to abnormal conditions in order to maintain the integrity of the bulk power system. This is an emergency action a system operator can take to curtail firm service to some customers in order to avoid a system collapse.
Locational marginal price (LMP): The price of energy in an organized energy market at a given location in the transmission network that is equal to the marginal cost of serving load. This is the sum of the systemwide market equilibrium (the marginal cost of the supply-demand baseline) plus any transmission congestion and line losses.
Native load: The end-use customers a load-serving entity (LSE) is obligated to serve.
Network transmission service: Network service refers to the transmission of energy from a transmission network-generating resource to a network load, and serves as the primary priority of the transmission system. This is described in a transmission provider’s Open Access Transmission Tariff filed with the Federal Energy Regulatory Commission.
Non-spinning reserve: Generation reserves that are not connected to the electric system but are capable of serving demand within a short timeframe. Interruptible load can also provide this service, as this demand can be removed from the electric system in a short timeframe.
North American Electric Reliability Council (NERC): An entity that exists to promote the reliability of electric generation and transmission. It consists of 10 regional reliability councils and one affiliate encompassing all electric systems in the United States, Canada and part of northern Mexico.
Off-peak: A period of time (often hours) identified as low electrical demand.
On-peak: A period of time (often hours) identified as high electrical demand.
Open transmission access: Transmission service that is offered equally to all interested parties. The Federal Energy Regulatory Commission requires transmission service providers to file an Open Access Transmission Tariff (OATT) that delineates how all parties receive non-discriminating service comparable to that provided by transmission owners themselves.
Operating reserve: The capability to restore transmission system supply-demand balance when a generator trips offline. These are provided by generators and demand resources that react quickly, by increasing output or decreasing load, to fill the void of the lost generator. These include spinning and supplemental (non-spinning) reserves.
Outage: The inability of a generator, transmission line or other electrical equipment to operate. Facilities are often taken offline for maintenance improvements, known as scheduled or planned outages. A forced outage occurs when equipment unexpectedly fails. Major outages can cause a system contingency, which system operators and planners must account for.
Peak demand: The maximum amount of electric power delivered or required over a given period (often considered at an instantaneous point in time or the highest hourly demand in a given day, season or year). For example, the highest demand for power often occurs on hot, summer afternoons. Peak demand is often referred to as peak load.
Planning authority: The entity responsible for the coordination and integration of transmission facilities and service plans, resource plans and protection systems.
Potential energy: The energy possessed by a body derived from its position, stresses within itself, electric charge or other characteristics. As applied to electricity generation, this potential may come from chemical energy stored in fossil fuels and biomass; nuclear energy stored in the nuclei of atoms; or gravitational energy stored at an uphill dam impoundment. This potential energy converts to mechanical energy that spins or rotates magnets around wire coils to induce electrical currents and voltages.
Public service commission (PSC): See public utility commission.
Public utility commission (PUC): A state regulatory agency that determines rates for regulated utilities. Also known as a Public Service Commission (PSC).
Reactive power: The portion of electricity that creates and sustains electric and magnetic fields of alternating-current equipment. Reactive power supply is required for most types of magnetic equipment, such as motors and transformers, and for reactive losses on transmission facilities. It is supplied by generators, synchronous condensers or electrostatic equipment such as capacitors and directly influences electric-system voltage. It is typically expressed in kilovars (kvar) or megavars (Mvar).
Regional transmission organization (RTO): An entity that facilitates electricity transmission on a regional basis with responsibilities for transmission system reliability, planning and operation. It must be independent of all generation and transmission owners and load-serving entities. FERC Order No. 2000 contains 12 characteristics and functions an entity must satisfy to become an RTO.
Reliability coordinator: The entity responsible for the reliable operation of the bulk electric system.
Reliability standard: A requirement for the operation of facilities on the bulk-power system to provide for reliable grid operation. Examples include cybersecurity and the design of planned additions or modifications to facilities. Reliability standards must be approved by the Federal Energy Regulatory Commission per Section 215 of the Federal Power Act, or other applicable governmental authority in other jurisdictions.
Retail electricity: Energy and power that are transmitted through distributed facilities to end users. The retail market refers to the interaction between load-serving entities and end-use customers. In restructured states, customers can choose their load-serving entity, whereas in regulated states, the utility is the sole provider.
Right of way: A corridor of land where electric transmission and distribution facilities may be located. Most transmission and distribution owners negotiate easements with property owners or use the right of eminent domain to gain access. Sometimes, they purchase the land outright.
Scheduled frequency: A reliable electric system must maintain supply-demand balance at a set frequency in real time operations. In the United States, this is set at 60 hertz.
Spinning reserve: Generators connected to the bulk electric system (synchronized to grid frequency) can immediately respond to system-frequency deviations. It’s similar to keeping something warm on the stove in case you need more food than you originally expected.
Step-down/Step-up: Step-down is the process of changing electricity from a higher to a lower voltage. Step-up is the opposite. Step-up transformers usually are located at generator sites, while step-down transformers are found at the distribution site.
Supplemental (non-spinning) reserve: Generators that can be brought online within usually 10 minutes, or demand-side resources that can respond in the same timeframe.
System operator: An individual or group at the control center of a balancing authority, transmission operator or reliability coordinator that operates or directs the operation of the bulk electric system in real time.
Telemetering: The process by which measureable electrical quantities from substations and generating stations are instantaneously transmitted to the system operator, and by which operating commands from the system operator are transmitted to the substations and generating stations.
Transmission congestion: See transmission constraint.
Transmission constraint: A limitation of one or more transmission elements that inhibits the transfer of electricity. This occurs during normal and contingency system operations. This is analogous to a kink in a hose. Constraints cause transmission congestion that can be relieved by increasing generation or reducing load in a given area.
Transmission operator: The entity responsible for the reliable operation of its transmission system.
Transmission owner: The entity that owns and maintains transmission facilities.
Transmission system: An interconnected group of high-voltage lines and associated equipment for the movement or transfer of electric energy between points of supply and distribution. The transmission system is intended to transmit high volumes of electricity over long distances, which is done more efficiently (i.e., lower line losses) at high voltage. Sometimes referred to as “the grid.”
Voltage: A measure of electromotive force, or electricity pressure, measured in volts (V). This is analogous to water pressure in a hose. An electrical system has a designated operating voltage.
Watt: The electrical unit of real power, or the rate of doing work. One watt is equivalent to 1/746 horsepower.
Wholesale electricity: Energy and power that are produced and transferred between generation owners, transmission owners and load-serving entities. Wholesale markets enable sales between these parties that load-serving entities resell to end-use customers at the retail level.