How SCED Works
beginnerThe Merit Order
The Merit Order
Every hour, the grid operator must answer: which generators run, and at how much output? The answer is SCED — Security-Constrained Economic Dispatch.
Generators submit bids — the minimum price they'll accept per MWh. The operator dispatches them cheapest-first until demand is met. This cost-ranked stack is called the merit order.
This system has three generators:
| Generator | Capacity | Bid Price |
|---|---|---|
| Nuclear | 400 MW | $25/MWh |
| Coal | 400 MW | $30/MWh |
| Gas CC | 400 MW | $45/MWh |
With load at 600 MW, the operator fills demand from the bottom of the stack:
- Nuclear dispatched fully → 400 MW
- Coal dispatched to 200 MW → demand met
- Gas CC not needed
The system price equals the bid of the last unit dispatched — coal at $30/MWh. Nuclear earns $30 too, even though it bid $25. This uniform clearing price — everyone earns the same price — is the foundation of competitive electricity markets.
Try it yourself
Lower Gas CC to $20/MWh
Gas CC becomes cheaper than coal — it jumps ahead in the merit order. Watch the marginal unit and clearing price change.
Raise Nuclear to $30/MWh
Nuclear now bids the same as coal. Both are on equal footing — the merit order ties, and the system price rises to $30/MWh regardless.