Spark spread

Spark spread,

Definition of Spark spread:

  1. The spark spread is the difference between the wholesale market price of electricity and its cost of production using natural gas. The spark spread can be negative or positive. If it is negative, the utility company loses money, while if it is positive, the utility company makes money. This measure is important because it helps utility companies determine their bottom lines (profits). If the spark spread is small on a particular day, electricity production might be delayed until a more profitable spread arises.

  2. The difference between the market price of electricity or natural gas and its production costs. The spark spread if often used to determine the financial stability of a power plant and gauge if the company should produce more or less electricity based on the figures. The formula for spark spread is: Price of Electricity - [ (Cost of Gas) * (Heat Rate) ] = $/Mwh - [ ($/MMBtu) * (MMBtu / Mwh) ].

  3. The spark spread is a standard metric for estimating the profitability of natural gas-fired electric generator. It is the difference between the input fuel costs and the wholesale power price. For electric power generation fueled by natural gas, this difference is called the spark spread; for coal, the difference is called the dark spread. The spark spread is typically calculated using daily spot prices for natural gas and power at various regional trading points.

Meaning of Spark spread & Spark spread Definition