{"id":12711,"date":"2026-09-17T16:26:07","date_gmt":"2026-09-17T14:26:07","guid":{"rendered":"https:\/\/be-storaged.de\/nicht-kategorisiert\/merit-order-principle\/"},"modified":"2026-10-19T16:38:35","modified_gmt":"2026-10-19T14:38:35","slug":"merit-order-principle","status":"publish","type":"post","link":"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/","title":{"rendered":"Merit-Order Principle"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">The merit-order principle describes a <strong>key mechanism for price formation in short-term wholesale electricity markets<\/strong>, particularly in <strong>day-ahead auctions<\/strong>. It determines the order in which power plants are used to generate electricity and the resulting electricity price. For companies, grid operators, and market participants, the merit-order principle is a key foundation for understanding <strong>electricity price fluctuations and market movements<\/strong>.  <\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_88 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Definition-of-terms\" >Definition of terms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Basic-Principle-of-Merit-Order\" >Basic Principle of Merit Order<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#The-merit-order-is-based-on-a-simple-logic\" >The merit order is based on a simple logic:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Typical-order\" >Typical order:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Pricing-in-the-Electricity-Market\" >Pricing in the Electricity Market<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Special-feature\" >Special feature:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Factors-Affecting-the-Merit-Order\" >Factors Affecting the Merit Order<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#The-Role-of-Renewable-Energy\" >The Role of Renewable Energy<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Impact-on-Electricity-Prices\" >Impact on Electricity Prices<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Implications-for-Businesses\" >Implications for Businesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Relationship-with-energy-storage-and-flexibility\" >Relationship with energy storage and flexibility<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Distinction-from-related-terms\" >Distinction from related terms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/merit-order-principle\/#Summary\" >Summary<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Definition-of-terms\"><\/span>Definition of terms<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">The merit-order principle refers to the <strong>order in which power plants are deployed on the electricity exchange<\/strong> based on their variable generation costs. Power plants with the lowest marginal costs are deployed first, followed by more expensive plants in accordance with demand. <\/p>\n\n<p class=\"wp-block-paragraph\">The price of electricity is <strong>determined by the most expensive power plant<\/strong> still needed to meet current demand.<\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Basic-Principle-of-Merit-Order\"><\/span>Basic Principle of Merit Order<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The-merit-order-is-based-on-a-simple-logic\"><\/span>The merit order is based on a simple logic:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n<ul class=\"wp-block-list\">\n<li>Power plants are sorted by increasing variable costs<\/li>\n\n\n\n<li>Low-cost generators feed electricity into the grid first<\/li>\n\n\n\n<li>As demand rises, more expensive power plants are being added<\/li>\n\n\n\n<li>The power plant that was most recently needed determines the market price for all of them<\/li>\n<\/ul>\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Typical-order\"><\/span>Typical order:<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n<ol class=\"wp-block-list\">\n<li>Renewable Energy (Wind, Solar)<\/li>\n\n\n\n<li>Lignite and hard coal power plants<\/li>\n\n\n\n<li>Gas-fired power plants<\/li>\n\n\n\n<li>Oil-fired or reserve power plants<\/li>\n<\/ol>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<p class=\"wp-block-paragraph\">However, the specific order of deployment within the merit order is not static but can change at short notice. <strong>Rising or falling CO\u2082 permit prices, as well as sharply fluctuating fuel costs<\/strong>\u2014particularly for natural gas and coal\u2014significantly <strong>influence the variable marginal costs<\/strong> of individual power plants. As a result, the order in which generation facilities are deployed can shift dynamically, which has a direct impact on the price of electricity and the merit order effect. <\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pricing-in-the-Electricity-Market\"><\/span>Pricing in the Electricity Market<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Supply and demand meet in the electricity market. Demand determines how many power plants are needed. The price of electricity is determined at the point where <strong>the supply curve and the demand curve<\/strong> intersect.  <\/p>\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Special-feature\"><\/span>Special feature:  <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">Under the so-called uniform-price mechanism, all successful bidders in a trading period receive the same market price. This creates economic incentives for efficient and flexible generation. <\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Factors-Affecting-the-Merit-Order\"><\/span>Factors Affecting the Merit Order<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Several factors influence the order and the resulting electricity price:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Fuel Prices (Gas, Coal)<\/li>\n\n\n\n<li>CO\u2082 Credit Prices<\/li>\n\n\n\n<li>Availability of Renewable Energy<\/li>\n\n\n\n<li>Weather Conditions<\/li>\n\n\n\n<li>Power Plant Outages<\/li>\n\n\n\n<li>Grid Congestion (Congestion Management in the Electric Grid)<\/li>\n<\/ul>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<p class=\"wp-block-paragraph\">These factors can shift the merit order in the short term and lead to sharp price fluctuations.<\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The-Role-of-Renewable-Energy\"><\/span>The Role of Renewable Energy<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Renewable energy sources have <strong>very low marginal costs<\/strong> and therefore rank <strong>at the top of the merit order<\/strong>. High levels of electricity fed into the grid from wind and solar power plants can: <\/p>\n\n<ul class=\"wp-block-list\">\n<li>displace more expensive power plants<\/li>\n\n\n\n<li>lower the price of electricity<\/li>\n\n\n\n<li>reduce the operating time of fossil-fuel power plants<\/li>\n<\/ul>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<p class=\"wp-block-paragraph\">This effect is often referred to as <strong>the merit-order effect<\/strong>.<\/p>\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-on-Electricity-Prices\"><\/span>Impact on Electricity Prices<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n<p class=\"wp-block-paragraph\">The merit-order principle explains why electricity prices can vary widely:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>High demand and expensive peak-load power plants are driving up prices<\/li>\n\n\n\n<li>High Renewable Energy Feed-in Reduces Prices<\/li>\n\n\n\n<li>High fuel or CO\u2082 prices contribute to price spikes<\/li>\n<\/ul>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<p class=\"wp-block-paragraph\">Negative electricity prices can also be explained by the interplay of supply, demand, and the technical minimum load.<\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Implications-for-Businesses\"><\/span>Implications for Businesses<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">The merit-order principle is relevant to businesses because it:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Explains fluctuations in electricity prices<\/li>\n\n\n\n<li>Influences Procurement Strategies<\/li>\n\n\n\n<li>serves as a basis for price formation in the day-ahead and intraday markets and makes flexibility economically quantifiable<\/li>\n<\/ul>\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n<p class=\"wp-block-paragraph\">Energy-intensive companies, in particular, benefit from an understanding of market dynamics.<\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Relationship-with-energy-storage-and-flexibility\"><\/span>Relationship with energy storage and flexibility<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Energy storage systems and flexible consumers can respond specifically to price fluctuations caused by the merit order:<\/p>\n\n<ul class=\"wp-block-list\">\n<li>Purchasing Electricity at Low Prices<\/li>\n\n\n\n<li>Avoiding the Use of Expensive Peaking Power Plants<\/li>\n\n\n\n<li>Reducing Network Load During Periods of High Prices<\/li>\n<\/ul>\n\n<p class=\"wp-block-paragraph\">Storage systems can reduce peak loads, take advantage of price signals, and\u2014with appropriate control\u2014contribute to grid stabilization.<\/p>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Distinction-from-related-terms\"><\/span>Distinction from related terms<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">Not to be confused with:<\/p>\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/be-storaged.de\/en\/wiki\/a-b-c-d\/day-ahead-market\/\" data-type=\"post\" data-id=\"11057\">Day-Ahead Market<\/a> &amp; Spot Market: Trading platform for next-day electricity deliveries<\/li>\n\n\n\n<li><a href=\"https:\/\/be-storaged.de\/en\/wiki\/e-f-g-h\/epex-spot-intraday-market-electricity-spot-market-intraday-trading-explained-simply\/\" data-type=\"post\" data-id=\"4556\">EPEX Spot Intraday Market<\/a>: Short-term electricity trading within a single day<\/li>\n\n\n\n<li>(Capacity Market vs. Energy Market): Compensation for maintaining generation capacity versus energy trading<\/li>\n\n\n\n<li><a href=\"https:\/\/be-storaged.de\/en\/wiki\/q-r-s-t\/control-energy-stabilizing-the-power-grid-in-the-event-of-fluctuations\/\" data-type=\"post\" data-id=\"5026\">Control Power<\/a>: Balancing Short-Term Grid Fluctuations<\/li>\n\n\n\n<li><a href=\"https:\/\/be-storaged.de\/en\/wiki\/q-r-s-t\/redispatch-2-0\/\" data-type=\"post\" data-id=\"8774\">Redispatch 2.0<\/a>: Grid-Side Interventions to Prevent Congestion<\/li>\n\n\n\n<li><a href=\"https:\/\/be-storaged.de\/en\/wiki\/m-n-o-p\/grid-fees-and-surcharges\/\" data-type=\"post\" data-id=\"11063\">Grid Fees and Surcharges<\/a>: Price Components Outside the Market Price<\/li>\n<\/ul>\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Summary\"><\/span>Summary<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n<p class=\"wp-block-paragraph\">The merit-order principle describes the <strong>order in which power plants are brought online based on their variable generation costs<\/strong>, thereby explaining how <strong>prices are formed in the electricity market<\/strong>. Power plants with low marginal costs are brought online first, while more expensive plants are brought online only when demand increases. <strong>The electricity price is determined by the most expensive power plant<\/strong> still needed to meet demand and is then applied to all generators in operation. Because of their low marginal costs, renewable energy sources often have a price-dampening effect, which can lead to a <strong>merit-order effect<\/strong>. Overall, this principle helps explain why electricity prices can fluctuate significantly and why flexibility\u2014such as through energy storage or controllable consumers\u2014is becoming increasingly important in a market-based energy system.   <\/p>\n","protected":false},"excerpt":{"rendered":"<p>The merit-order principle describes a key mechanism for price formation in short-term wholesale electricity markets, particularly in day-ahead auctions. It determines the order in which power plants are used to generate electricity and the resulting electricity price. For companies, grid operators, and market participants, the merit-order principle is a key foundation for understanding electricity price [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_links_to":"","_links_to_type":0,"footnotes":""},"categories":[107,102],"tags":[],"class_list":["post-12711","post","type-post","status-publish","format-standard","hentry","category-m-n-o-p","category-wiki"],"acf":[],"_links":{"self":[{"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/posts\/12711","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/comments?post=12711"}],"version-history":[{"count":1,"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/posts\/12711\/revisions"}],"predecessor-version":[{"id":12712,"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/posts\/12711\/revisions\/12712"}],"wp:attachment":[{"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/media?parent=12711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/categories?post=12711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/be-storaged.de\/en\/wp-json\/wp\/v2\/tags?post=12711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}