Why electricity can't be stored up, and how that shaped the market

A product you must use the moment it is made

Rice can sit in a warehouse and be sold later. Petrol can be kept in a tank. Electricity is different. The power a plant produces travels down the wires and is used somewhere almost at that very moment.

There are ways to store electricity, such as batteries and pumped hydro. But they are still small compared with what a whole country uses, some electricity is lost going in and out, and storing it costs money. So a power system basically runs by matching the amount produced and the amount used at every instant.

What happens when they don't match

When supply and demand drift apart, the first thing to move is the frequency. If less is produced than used, the frequency falls; if more is produced, it rises. If the frequency leaves its set range, protective devices trip to save generators and equipment, and in the worst case a wide area goes dark at once.

So someone must always watch the whole grid and move generators up and down. In Korea, the Korea Power Exchange does this. It is called dispatch.

Why the market looks the way it does

The single fact that electricity can't be stored up decides almost the whole shape of the power market.

① Plan ahead, then correct moment by moment. A day ahead, the market plans which generators will run and how much in each hour of the next day, based on the demand forecast and the bids generators submit. But weather and demand always differ a little from the forecast. So on the day itself, the system operator adjusts generator output moment by moment to close the gap.

② The price changes by the hour. In the small hours, when demand is low, cheap generators are enough; when demand peaks, expensive ones must be switched on too. So the market price (SMP) differs from hour to hour. How the SMP is set is covered in no. 3 of this intro series.

③ Spare capacity gets paid too. There must be enough electricity even in the single hour of highest demand. That means keeping plants that rarely run ready at all times. At the end of 2025, 146,157 MW of capacity took part in the market, and 547,163 GWh was traded that year — less than half of what all of it could have produced running flat out all year. The money paid separately from energy sales so that these standby plants don't close is the capacity payment (intro series no. 5).

④ Reserves are kept aside. In case a large generator suddenly trips, a margin that can raise output immediately is always kept free. This margin is the reserve, and providing it is paid for separately as an ancillary service.

How it differs from other markets

In an ordinary market, a seller and a buyer meet, agree on a price, the goods change hands, and that's it. The power market has one more party in between: an operator who keeps the laws of physics. Whoever agreed to sell at whatever price, supply and demand on the wires must match at every moment.

So news about the power market is easier to read in two layers. One is the money layer: who gets paid how much. The other is the electricity layer: which generator actually ran when. The two are linked, but they are not the same.