U.S. Department
of Justice
Fuel Cost Curve
| A simplified model of price determination in a PJM-administered auction market. The chart is a stylized market supply curve, or "fuel curve," that assumes that all electricity-generation units are bid into the auction at their marginal cost. The "x" axis of the chart represents generating capacity in increments of 5,000 megawatts, while the "y" axis represents dollars per megawatt hour. The fuel curve traces an upward path from very low-cost hydroelectric and nuclear units, which are plotted at the lower end of both axes, up through higher cost-per-megawatt-hour units such as coal-fired steam turbine units, up to highest-cost "peaking" gas- and oil-fired combustion turbine units. The chart shows the following: Y-axis = COST ($/MWh) It illustrates how the price per megawatt hour rises to P2 as demand increases along the fuel curve. |
Updated August 24, 2015