The marginal cost of adding 1 kWh at the electrical node.

-Calculated according to the clearing price + the transmission grid congestion costs at the calculating point + losses.

-The higher the LMO, the more economically feasible it is to build a generating unit in the area.

-Producers receive an energy payment that is calculated at the supply point and in practice receive the clearing price.

-Consumers pay according to the price calculated at the nearest point to a high-voltage connection which is defined as the calculation node in the software performing the simulation.

-In Europe each country is a single node, while in the US there are tens of thousands of nodes.

Gina Cohen
Natural Gas Expert