Capacity Market
A market mechanism where power generators and storage systems are paid to be available to produce electricity during peak demand periods, ensuring sufficient supply exists to meet forecasted demand.
Why It Matters
Capacity market payments are a revenue stream for grid-scale batteries and VPPs. These costs are passed through to consumers as part of the supply portion of electricity bills.
Related Terms
Demand Response
A program where utilities pay customers to reduce electricity usage during peak demand events, often by cycling AC units, adjusting thermostats, or discharging batteries to the grid.
Virtual Power Plant (VPP)
A network of distributed energy resources (solar, batteries, EVs, smart appliances) coordinated by a central platform to provide grid services collectively, functioning like a power plant.
Demand Charge
A utility charge based on your peak power usage (measured in kW) during a billing period, common for commercial customers.