Dispatch Stack

At any given moment, a grid operator must choose which power plants to run. The answer follows a simple rule: turn on the cheapest plants first, then add more expensive ones as demand rises. This ordering is the dispatch stack, and it determines which fuels generate your electricity hour by hour.

Plants are dispatched in order of marginal cost, the cost of producing one additional megawatt-hour (mostly fuel). Nuclear and renewables have near-zero marginal cost (fuel is free or extremely cheap), so they run whenever available. Coal and combined-cycle gas have moderate fuel costs and fill the middle. Simple-cycle gas turbines and oil peakers have the highest fuel costs and run only during peak demand. This creates a consistent pattern: baseload plants run 70-90% of hours, intermediate plants run 30-60%, and peakers run 5-15%.

Build a simplified stack. A grid has 10 GW of nuclear ($5/MWh marginal), 15 GW of CCGT ($25/MWh), 5 GW of coal ($30/MWh), and 3 GW of gas peakers ($80/MWh). At 2 AM, demand is 8 GW: only nuclear runs. At 3 PM, demand hits 32 GW: nuclear, CCGT, and coal all run, plus 2 GW of peakers.

Note the price implication. In many markets, the last plant dispatched sets the price for all generators. At 2 AM, the clearing price is $5/MWh. At 3 PM, it is $80/MWh.

What happens to coal's position in the dispatch stack when cheap solar enters the market?

Solar pushes coal up the stack. Zero-marginal-cost solar displaces the cheapest fossil plants during daylight hours. Coal runs fewer hours, its capacity factor drops, and its revenue shrinks. This is the market mechanism that has driven coal retirements across the U.S.

The dispatch stack translates thermodynamics and fuel prices into the economic survival or death of power plants.

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