Abstract
The economic merit order in electricity markets determines the sequence in which power generation sources are dispatched based on their marginal costs. This paper explores two approaches to the merit order: dispatch point and delivery point, and evaluates their implications for consumers and electricity rates. Using examples from North America, Europe, India, and Pakistan the paper assesses which approach better benefits consumers and results in more efficient kWh rates.
Introduction
The merit order mechanism is crucial in electricity markets, aiming to ensure cost effective generation and distribution. This paper compares the dispatch point and delivery point merit orders, evaluating their impacts on consumer pricing and overall efficiency, with real world examples from North America, Europe, and India.
Conceptual Framework
2.1 Dispatch Point Merit Order
The dispatch point merit order ranks power plants based on the cost of electricity production alone. This approach is simple and focuses on minimizing generation costs, but does not consider transmission constraints or losses.
2.2 Delivery Point Merit Order
The delivery point merit order includes both generation and transmission costs. It ranks generators based on the total cost of delivering electricity to the consumer, reflecting a more comprehensive cost structure.
Comparative Analysis
3.1 North America
Dispatch Point:
Example: PJM Interconnection (U.S.)
PJM operates a regional transmission organization (RTO) that uses a dispatch point merit order. PJM’s market design focuses on minimizing the generation cost by dispatching the cheapest available sources first. This has led to relatively low electricity prices in some regions, but issues arise with transmission congestion.
Impact: While dispatch point pricing can lead to lower short-term rates, transmission constraints in PJM’s network can cause significant price spikes in congested areas, such as during high demand periods or extreme weather events.
Delivery Point:
Example: California Independent System Operator (CAISO)
CAISO incorporates both generation and transmission costs in its pricing model. The CAISO market design adjusts prices based on the delivery point, considering both the cost of generation and the impact of transmission congestion.
Impact: This approach can result in higher prices in the short term but offers a more accurate reflection of the true cost of electricity delivery, helping to manage transmission congestion and reduce volatility in pricing.
3.2 Europe
Dispatch Point:
Example: The British Electricity Trading and Transmission Arrangements (BETTA)
In the UK, BETTA uses a dispatch point merit order for generation. Generators are dispatched based on their marginal costs, which helps in maintaining low prices when generation costs are low.
Impact: While the dispatch point model has been effective in reducing short-term costs, transmission constraints and congestion can sometimes lead to price disparities across different regions.
Delivery Point:
Example: The European Network of Transmission System Operators for Electricity (ENTSOE)
ENTSOE’s framework often considers delivery point costs by integrating transmission tariffs into the pricing. This model helps manage cross-border electricity flows and ensures that transmission costs are accounted for in market prices.
Impact: The delivery point approach leads to more stable pricing across different regions and better reflects the actual cost of delivering electricity, though it can result in higher prices compared to the dispatch point model.
3.3 India
Dispatch Point:
Example: Indian Energy Exchange (IEX)
In India, the IEX uses a dispatch point merit order for day ahead market operations. This approach prioritizes generators based on their bid prices and marginal costs, aiming to minimize generation costs.
Impact: The dispatch point model has helped in lowering prices in areas with abundant cheap generation sources. However, India’s transmission infrastructure can cause significant losses and inefficiencies not reflected in this pricing model. 
Delivery Point:
Example: Power System Operation Corporation Limited (POSOCO)
POSOCO manages transmission and operates the national grid, considering both generation and transmission costs. The approach aims to optimize the total cost of electricity delivery, accounting for transmission losses and grid congestion.
Impact: Incorporating delivery point costs has led to more accurate pricing that reflects the true cost of electricity. This model helps in managing transmission constraints and reducing inefficiencies across the grid.
Pakistan’s Economic Merit Order:
In Pakistan, the economic merit order is managed by the National Transmission and Dispatch Company (NTDC) along with National Power Control Centre (NPCC) is responsible for controlling and monitoring Pakistan’s national power generation and transmission system. NPCC is responsible for ensuring the efficient and reliable operation of the national power grid. The NTDC/NPCC uses a dispatch point-based merit order system, where power generation sources are dispatched based on their marginal costs at the point of generation
Comparative Insights
Economic Efficiency:
Dispatch Point: Simplifies the dispatch process but may result in inefficiencies due to unaccounted transmission constraints. Examples from PJM and BETTA illustrate the potential for price volatility and regional disparities.
Delivery Point: Provides a comprehensive view of the total cost, improving overall system efficiency and stability. Examples from CAISO, ENTSOE, and POSOCO demonstrate how accounting for transmission costs can lead to more stable and fair pricing.
Impact on Consumers:
Dispatch Point: Often results in lower short-term rates but can lead to higher prices during periods of transmission congestion. This effect is evident in markets like PJM and IEX.
Delivery Point: May lead to higher short-term prices but offers better long-term stability and fairness. The delivery point model, as seen in CAISO and ENTSOE, aligns pricing with the actual cost of delivering electricity.
kWh Rates:
Dispatch Point: Generally results in lower short-term kWh rates but may not account for long-term transmission costs. Short-term benefits can be seen in markets such as BETTA and IEX.
Delivery Point: Provides a more accurate reflection of total costs, potentially leading to more stable kWh rates over time. Markets such as CAISO and POSOCO show that delivery point merit orders can reduce long-term price volatility.
Conclusion
The choice between dispatch point and delivery point merit orders has significant implications for electricity pricing and market efficiency. While dispatch point models can offer lower short-term rates, delivery point models provide a more comprehensive view of the total cost of electricity, leading to more stable and fair pricing. The examples from North America, Europe, India, and Pakistan illustrate that incorporating delivery point costs often results in more efficient and equitable outcomes for consumers, despite potential short-term price increases.n

Pakistan’s current economic conditions are indeed challenging, with high inflation, a depreciating currency, and a significant trade deficit. The country is facing a balance of payments crisis, and the IMF has extended a bailout package to support economic stability.
However, despite these difficulties, there are reasons to remain hopeful about Pakistan’s economic future. The government has taken steps to address the crisis, including implementing austerity measures, increasing taxes, and promoting exports.
Moreover, Pakistan has immense potential for growth, with a large and young population, vast natural resources, and a strategic location bridging Asia and the Middle East. The country has made significant progress in areas like tech startups, e-commerce, and renewable energy.
Investors are taking notice, with foreign investment increasing in sectors like energy, infrastructure, and telecommunications. Pakistan’s diaspora community is also playing a vital role in sending remittances and investing in their homeland.
To tap into this potential, the government is focusing on improving the business environment, enhancing trade facilitation, and promoting tourism. Initiatives like the China-Pakistan Economic Corridor (CPEC) and the Special Economic Zones (SEZs) are expected to attract foreign investment and create jobs.
The Middle East, particularly Saudi Arabia, has emerged as a hub for economic growth and development, offering a plethora of opportunities for Pakistani engineers and businessmen. Among the most exciting prospects is Saudi Arabia’s futuristic city, Neom, which is set to revolutionize the region’s economy.
Located on the Red Sea coast, Neom is a $500 billion mega project aimed at diversifying Saudi Arabia’s economy beyond oil. This futuristic city will be a hub for innovation, entrepreneurship, and sustainability, offering vast opportunities for Pakistani professionals.
Infrastructure Development, Renewable Energy, Smart City Technologies, Civil, mechanical, HVAC, Electrical and other engineering works are waiting for Pakistani engineers and professionals. Pakistani engineers can contribute to this massive project.
Neom offers opportunities for Pakistani businessmen as well. They can invest in various sectors, including manufacturing, logistics, and services. Pakistani entrepreneurs can collaborate with Saudi counterparts to establish joint ventures in Neom, leveraging each other’s strengths.
The current economic conditions are tough. Pakistan has faced similar challenges in the past and has always emerged resilient. The country’s strong social fabric, vibrant culture, and determined people are its greatest assets.
As the government continues to implement reforms and address economic challenges, there is reason to believe that Pakistan will bounce back stronger. With patience, perseverance, and collective effort, the country can unlock its vast potential and achieve sustainable economic growth.
Let us remain hopeful and work together towards a brighter economic future for Pakistan.n

“France recently banned short-haul flights to cut carbon emissions, a move that Pakistan might face if it doesn’t advance Sustainable Aviation Fuel (SAF) initiatives”, according to Mr Ali Abdullah, the country sales manager of Axens, a solution provider for sustainable technologies. In a discussion about the future of biofuels in Pakistan, Abdullah emphasized the urgency of transforming the aviation sector into a sustainable and eco-friendly enterprise amid geopolitical changes and rising carbon emissions.
The aviation industry is crucial for global connectivity and economic development. However, rapid changes in geopolitical conditions and increasing carbon emissions pose significant threats to Pakistan’s already fragile economy. As the world faces the consequences of climate change, there is an urgent need to transform the aviation sector into a sustainable and eco-friendly enterprise. A key solution is the investment in and widespread adoption of Sustainable Aviation Fuels (SAFs). SAFs are categorized into net carbon-neutral drop-in fuels like synthetic or bio-fuels and non-drop-in fuels like hydrogen. Widely used by airlines globally, SAFs comply fully with aviation fuel standards (certified under ASTM D7566 specifications) and can be blended with conventional jet fuel for immediate use. They are also compatible with existing aircraft engines and airport fuel infrastructure.
Various technologies are being developed to convert different feedstocks into jet fuel. Alcohol-to-jet technologies, which use feedstocks ethanol derived from first-generation feedstock: sugar cane (molasses), maize, or second-generation feedstock: lignocellulose biomass like bagasse, rice straw, wheat straw, banana leaves, etc. These technologies are supported by entities such as DARPA and the U.S. Navy and have commercial partnerships with companies like Boeing and Virgin Atlantic. Hydro-processed ester and fatty acids processes (HEFA) utilize waste oil and vegetable oils, backed by the U.S. Navy and NASA, with partners including Lufthansa and GE Aviation. Catalytic Hydrothermolysis and Hydrotreated Depolymerized Cellulosic Jet technologies, funded by the FAA, involve companies such as Rolls-Royce. Gas-to-jet methods use biogas, supported by the U.S. Department of Energy, with commercial partners like Qatar Airways. Sugar-to-Jet and Direct Sugar Biological to Hydrocarbons involve advanced catalytic and biological processes, supported by the U.S. Navy and FAA, with partnerships with companies like Embraer and Azul Airlines. However, Mr Abdullah emphasized that HEFA processes are more beneficial for Pakistan due to their mature and proven technology, availability of huge amounts of cooking oil and comparatively lower investment requirements. When inquired about ethanol, he mentioned that it is preferable to use it for gasoline blending to reduce the import bill or for export purposes on a short-term basis until HEFA feedstock is spent then alcohol to jet may be needed.
While answering the financing issue for funding SAF’s plants in Pakistan, He asserted that currently, it’s very difficult to get financial support for the project based on fossil fuels. However, the Asian Development Bank and other finance institutions are very keen to support projects focused on reducing carbon emissions. On the profitability of the projects, he mentioned that the export-oriented manufacturing of SAFs is more beneficial as there are a lot of incentives for export-oriented companies in Pakistan.
Reflecting on the potential advantages of Sustainable Aviation Fuels (SAF) for Pakistan, Mr Abdullah highlighted the following points:
Reducing Carbon Emissions: The aviation industry is a significant contributor to greenhouse gas emissions, with conventional jet fuels being a major source of carbon dioxide. SAFs, derived from renewable resources such as biomass, waste oils, water, and algae, offer a viable alternative. These fuels can reduce carbon emissions by up to 65%, aligning with global efforts to achieve carbon neutrality and meet national emission reduction targets. This will also provide Pakistan with valuable carbon credits for trading and earning foreign exchange.
Economic Advantages: Besides environmental benefits, investing in SAFs offers economic advantages. Traditional jet fuels are susceptible to price fluctuations due to volatile oil prices, geopolitical uncertainties, and the finite nature of fossil fuel resources. In contrast, SAFs provide a more stable and predictable fuel source. Airlines are investing in SAFs to appeal to environmentally conscious travellers and avoid carbon taxes. In the future, airlines using conventional fuels may face bans or penalties in regions like the European Union. Pakistan could lose revenue if such measures are implemented, investing in SAFs is crucial for future-proofing the aviation industry and positioning it as a responsible global player.
In addition to these highlighted points, I believe that we must be forward-looking to meeting Strategic Needs. Military operations are energy-intensive, with aviation playing a critical role in rapid deployment, strategic reconnaissance, and tactical support. Conventional jet fuels, mostly based on imported crude in Pakistan, pose risks of fuel scarcity and high costs during operations. Given India’s increasing influence, there could be embargoes on crude oil imports during conflicts. Additionally, reliance on foreign technologies can hinder military operations if embargoes are placed on importing catalysts or other technological equipment. Investing in SAFs ensures a diversified and sustainable energy supply for military aviation, mitigating the risks associated with dependence on traditional fossil fuels.
In conclusion, the imperative to invest in Sustainable Aviation Fuels (SAFs) is clear and multifaceted. SAFs offer a viable solution to reducing carbon emissions, a crucial step in combating climate change and aligning with global carbon neutrality goals. Economically, SAFs provide stability in a market plagued by volatile oil prices and geopolitical uncertainties, ensuring a more predictable fuel source for airlines. Strategically, SAFs secure a diversified and sustainable energy supply, critical for both commercial and military aviation in Pakistan. Furthermore, the development and adoption of SAFs will drive technological innovation, enhance local expertise, and create job opportunities. By committing to SAF initiatives, Pakistan can future-proof its aviation industry, meet national and international environmental standards, and position itself as a forward-thinking, responsible global player.n

Best Electric Panel (Pvt) Ltd is a leading switchgear manufacturing company; it was established in 1972. The founder and CEO is Mr. Abdul Hafiz Sheikh.
Mohammad Ahsan Sheikh, the dynamic Director of Sales and Marketing at Best Electric Panel (Pvt) Ltd, has been spearheading the company’s expansion efforts in the South Region. Under his astute leadership and strategic vision, the company has achieved remarkable success in this territory. His dedication, expertise, and results-driven approach have made him an invaluable asset to Best Electric Panel (Pvt) Ltd, and his continued focus on the South Region is expected to drive even greater success for the company.
The company specializes in the production of low-voltage switchgear, offering a wide range of products, including:
1- LV Switchgear
2- MV Switchgear
3- Switchgear Component
1- LV Switchgear
LV Panel
Motor Control Centers
Power Factor Improvement panels
Automation panels
Synchronizing panels
Cable management systems, such as cable trays and cable ladders
-Active Hormonic Filter
-Sandwich Bus
2- MV Switchgear
-MV Panel
3-Switchgear Component
Circuit Breaker
Manual Changeover
Control Push Button & Selector Switch
SPD
Terminal Block
Electronic Voltage Protector
These products are designed to provide efficient and reliable electrical distribution and control solutions for various industries and applications.
Best Electric Panel (Pvt) Ltd, a premier switchgear manufacturing company, has its headquarters and state-of-the-art manufacturing facility located in Hyderabad. The company takes pride in its in-house panel manufacturing capabilities, leveraging cutting-edge technology to ensure high-quality production.
The facility is equipped with an array of modern machinery, including: CNC laser cutting machines, CNC bending machines CNC punching machines, CNC bus bar machines. These advanced machines, along with other modern equipment, enable Best Electric Panel (Pvt) Ltd to maintain stringent quality control, increase productivity, and deliver superior switchgear products to their clients.
Best Electric Panel (Pvt) Ltd has a diverse and esteemed client base across various industries, including Oil & Gas, Cement, Sugar, Textile Industries, Automotive Sector and Commercial Projects. By serving such a wide range of industries, Best Electric Panel (Pvt) Ltd demonstrates its versatility, expertise, and commitment to delivering high-quality switchgear products that meet diverse client needs.
Best Electric Panel (Pvt) Ltd prioritizes exceptional quality during the manufacturing process, which enables them to produce state-of-the-art products that stand out in the industry. Their commitment to quality is evident in every stage of production, from design to delivery. Best Electric Panel (Pvt) Ltd team of experts meticulously inspects every component and assembly to ensure precision and accuracy. The company has implemented rigorous testing and inspection protocols to guarantee that every product meets or exceeds industry standards. Best Electric Panel (Pvt) Ltd selects only the finest materials, sourced from reputable suppliers, to ensure durability and performance. By leveraging cutting-edge technologies, such as CNC machines, and innovative production methods, Best Electric Panel (Pvt) Ltd achieves exceptional quality and consistency. The company staying up-to-date with the latest technologies and industry trends to continually enhance their products and manufacturing processes. The result is a range of state-of-the-art products that offer reliability, efficiency, and superior performance. Best Electric Panel (Pvt) Ltd is dedication to quality has earned them a reputation as a trusted partner in the electrical switchgear industry.
Best Electric Panel (Pvt) Ltd prioritizes building long-term relationships with their clients by offering exceptional after-sales services, ensuring that their customers receive the highest quality support and assistance beyond the initial product purchase. Their dedicated team responds quickly to client inquiries, concerns, and requests, providing timely solutions and minimizing downtime. The company offers expert technical assistance, helping clients troubleshoot issues, optimize product performance, and resolve any technical queries. They provide scheduled maintenance services to ensure the products continue to operate at peak efficiency. The company offered efficient repair and replacement services, minimizing disruption to clients’ operations. They worked closely with clients to understand their unique needs, offering tailored solutions and personalized support to ensure their satisfaction.
In addition to manufacturing high-quality electrical panels, Best Electric Panel (Pvt) Ltd also extends its expertise to dealing in a wide range of switchgear components and representing Original Equipment Manufacturer (OEM) products. These components are Circuit breaker, Cam switches, Control push buttons & Selector switch, SPD, Terminal block & Electronic voltage controllers, sourced from trusted OEMs.
Best Electric Panel (Pvt) Ltd is committed to supporting and promoting local manufacturing and economic growth in Pakistan. The company takes pride in the “Made in Pakistan” label and is dedicated to contributing to the country’s industrial development. Currently, Best Electric Panel (Pvt) Ltd is working with OEM (Original Equipment Manufacturer) products, which are being continuously improved and enhanced. In the near future, the company plans to develop or assembled these OEM products in Pakistan and affix the “Made in Pakistan” tag on these products. This future plan demonstrates Best Electric Panel (Pvt) Ltd is commitment to nation-building, economic growth, and self-reliance. By embracing the “Made in Pakistan” philosophy, the company is poised to make a positive impact on the country’s industrial landscape and contribute to its prosperity.n