What is virtual bidding?

Virtual bidding is when electricity is bought and sold without it ever being physically produced or consumed. This type of financial contract is awarded at day-ahead prices and settled at real-time prices.

Where have you heard about virtual bidding?

Virtual bidding has become an important part of the major electricity markets in the US during the past decade. Although it can boost the efficiency of electricity markets, it's not without risk.

What you need to know about virtual bidding.

A virtual bidding platform gives investors a way to participate in a physical market without physical assets or presence on the grid. It’s essentially a form of speculation similar to futures trading in the other commodity markets. However, there are a number of differences. Virtual bidding usually occurs over very short timeframes and trading isn’t done on a continual basis.

There are many benefits of virtual bidding, including improvements to market efficiency and a reduction in the power of dominant market forces. The main risk is that virtual trades will be used to leverage positions in other markets.

Find out more about virtual bidding.

Check out our definition of commodity.