Electricity price area
An electricity price area is a zone throughout which the electricity is traded at the same spot price on a power exchange. An electricity price area are decided by transmission system operator and can be a whole country, or parts of it.
EPADs and price area risk
The electricity price usually differs from the system price from one price area to another, e.g. when there are constraints in the transmission grid. A special contract for difference called Electricity Price Area Differentials or EPAD allows members on the power exchange to hedge against this market risk called area price risk.
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