Spark Spread

AAA

DEFINITION of 'Spark Spread'

The difference between the market price of electricity and its cost of production. The spark spread can be negative or positive. If it is negative, the utility company loses money, while if it is positive, the utility company makes money. This measure is important because it helps utility companies determine their bottom lines (profits). If the spark spread is small on a particular day, electricity production might be delayed until a more profitable spread arises.

INVESTOPEDIA EXPLAINS 'Spark Spread'

"Spark spread" is also the name of a trading strategy based on differences in the price of electricity and its cost of production. Investors can profit from changes in the spark spread through over-the-counter trading in electricity contracts. Energy derivatives allow investors to hedge against or speculate on changes in electricity prices.


RELATED TERMS
  1. Electric Utilities Industry ETF

    An exchange-traded fund that invests in companies which generate ...
  2. Wholesale Energy

    A term referring to the purchase and sale of energy products ...
  3. Renewable Energy Certificate - ...

    A certificate that is proof that one megawatt-hour (MWh) of electricity ...
  4. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  5. Bottom Line

    Refers to a company's net earnings, net income or earnings per ...
  6. Dow Jones Utility Average - DJUA

    The Dow Jones Utility Average is a price-weighted average of ...
Related Articles
  1. Peak Oil: What To Do When The Wells ...
    Economics

    Peak Oil: What To Do When The Wells ...

  2. Do-It-Yourself Projects To Boost Home ...
    Home & Auto

    Do-It-Yourself Projects To Boost Home ...

  3. 10 Ways To Save Energy And Money
    Personal Finance

    10 Ways To Save Energy And Money

  4. Fueling Futures In The Energy Market
    Options & Futures

    Fueling Futures In The Energy Market

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center