← Policy & Regulation: Pricing and Tariff Control (all topics)
Merchant / DAM tariffs
What it is
Power sold on the exchanges - day-ahead market, real-time market and term-ahead contracts - rather than under a long-term PPA. Prices clear on demand and supply, spiking in summer peaks and collapsing in solar hours
Merchant exposure is the opposite of the regulated model: uncapped upside, no floor
Impact on industries
- Captures scarcity pricing during peak demand, so a plant with merchant capacity earns far more than regulated tariffs in tight conditions
- Gives flexibility to generators without PPAs, and lets buyers meet short-term needs without committing to 25-year contracts
- Highly volatile and increasingly depressed during daytime solar hours, so the price signal moves against thermal exactly when solar output peaks
- Price caps imposed during shortages truncate the upside while leaving the downside intact
- The merchant-regulated mix is now the central portfolio decision for a generator, balancing certainty against upside