Spark and Dark Spreads
Spark and dark spreads measure the margin from turning fuel into power, net of efficiency and CO₂ costs.
The spark spread compares power prices to gas costs adjusted for plant efficiency and carbon costs.
Dark spreads play the same role for coal-fired generation; both drive the value of thermal plants.
Tolling and generation assets are effectively options on these spreads, constrained by capacity and operating limits.
This figure compares spark and dark spreads for gas and coal plants. Fuel and CO₂ costs stack into a generation cost bar, and the spread is the margin between power price and that bar. Use the sliders to move fuel, CO₂, and efficiency and see how plant profitability responds.
Spark and dark spreads are gross generation margins: power price minus the cost of fuel and CO₂ per MWh. Efficiency shrinks the fuel term; higher emission factors amplify the CO₂ term.
A positive spread means the plant is in the money, subject to operating and flexibility constraints. Structurally, tolling contracts and generation assets are options on these spreads, so any risk or hedging analysis should start by asking which factors move fuel cost, CO₂ cost, and power price together.