Marginal heat rate

The marginal heat rate represents the assumed heat rate of the marginal unit at a specific market location given the market price of natural gas and electricity. The marginal heat rate assumes that the marginal unit is powered by natural gas and is determined by the ratio of the electricity price and the natural gas price for a particular delivery period. For example, if the spot price of natural gas in New York City is $2.30/MMBtu and the spot price for on-peak power in New York City is $25.00/MWh, the marginal heat rate is:

Marginal heat rate = 25.00 / 2.30 = 10.87 MMBtu/MWh or 10,870 Bth/kWh

The marginal heat rate data over time is analyzed to determine which units are competitive in a market and how often a generator with a specific heat rate would be expected to be economic to run.