How Transmission Losses Affect Prices

A Lossless World

In an ideal grid, electricity moves from generators to loads without any losses. Every megawatt produced at the plant arrives intact at the customer.

This system has:

• Coal Plant at the Generation Hub: 600 MW at $30/MWh
• Gas Peaker at the Load Center: 200 MW at $80/MWh
• City Load: 400 MW (flat all day)
• Transmission line: 500 MW capacity (uncongested)

With no congestion and no losses, coal can deliver all 400 MW over the line. Gas never runs. Both buses have the same LMP: $30/MWh.

When there are no transmission constraints and no losses, electricity is priced identically everywhere — the grid acts as a single copper plate.