Exploring Merit Order and Marginal Abatement Cost Curve in Python

Wholesale electricity prices are determined using a merit order curve, which sequences power plants based on the ascending order of their marginal production costs. This guide provides a step-by-step Python implementation for constructing this curve, using libraries like pandas and Matplotlib. The process involves arranging different power plant types by cost, calculating cumulative capacity, and visualizing how electricity demand intersects the supply stack to set the market-clearing price. It also demonstrates how to create an interactive plot with ipywidgets to show how price changes with demand. The concept of a marginal abatement cost curve is also introduced as a method for evaluating decarbonization strategies.