Real-Time Markets and Reserves

The dispatch stack tells you which plants run. The load balancing hierarchy tells you how the grid responds to surprises. Real-time markets are the mechanism that connects these two systems, pricing electricity every five minutes to keep supply and demand matched continuously.

Day-ahead markets clear 24 hours in advance based on forecasts. But forecasts are always wrong. Real-time markets settle the difference. If a generator trips offline at 2 PM, the real-time price spikes to attract replacement power. If wind output exceeds forecasts, the price drops. These five-minute prices signal the grid's actual stress level, not yesterday's best guess.

A January cold snap. Suppose the day-ahead price for 6 PM cleared at $45/MWh. The front arrives faster than forecast, pushing demand 5 GW above projections, and the real-time price hits $250/MWh for two intervals as expensive peakers ramp up.

Why not just settle everything in the day-ahead market?

Because reality diverges from forecasts. Weather shifts, generators break, industrial loads surge. Real-time markets provide continuous price correction. Without them, grid operators would have to procure massive reserves to cover every possible deviation, raising costs for everyone. The five-minute settlement interval makes the price signal granular enough to guide fast-responding resources like batteries and demand response to where they are needed most.

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