Intraday Trading


Intraday tradingIntraday trading refers to the buying and selling of electricity on spot markets, which is delivered on the same day. The short-term procurement of electricity is handled on spot markets. As a flexible trading venue, the spot market offers quarter-hour contracts for the following day. It also enables continuous trading, in which electrical energy can be traded up to a few minutes before physical delivery. Spot markets have rapidly gained in importance since the advent of renewable energies. The main purpose of intraday trading is to minimize surpluses or shortfalls in balancing groups through short-term trading on the exchange. This makes it possible to counteract unforeseen changes in electricity production before having to resort to balancing energy, which should only serve as a safety reserve.

Where is this battery storage system used?

In an energy market with a high proportion of renewables, supply forecasts are very complex due to imperfect weather forecasts and an increasing proportion of solar and wind energy, which fluctuates over time. The intraday market makes it possible to correct shortages and surpluses at short notice. Price volatility on the spot markets in Germany, France and Switzerland has increased dramatically in recent years, making flexibility increasingly valuable for the electricity grid, especially in view of the ambitious expansion targets for renewable energies. Increasing volatility leads to rising price spreads. Negative prices are occurring more frequently on the spot markets, although the price level is generally very high, and thanks to its extremely fast response time, these extremely volatile price fluctuations enable the large-scale battery storage system to participate profitably in intraday trading. Depending on the situation, the storage system is able to choose the most lucrative market and become active in it.
Battery storage systems use two trading methods:

Arbitrage trading
The day-specific consumption behavior of connected consumers and the fluctuating generation of renewable energy systems over the course of the day lead to different energy prices. Short-term storage systems such as large-scale battery storage systems can buy energy cheaply in a 15-minute interval and sell it at a higher price at a later point in time. ‍‍

Each 15-minute contract of a day can be traded from 16:00 on the previous day. Depending on consumption and generation forecasts, the price fluctuates until actual delivery. The same 15-minute contract can therefore be bought and sold several times at a profit before the trading algorithm finally decides whether the amount of energy should be physically stored.


How does intraday trading work?

In general, the quantities of electricity produced or consumed must be forecast in advance. For smaller consumers such as households, this is done by the electricity supplier using standard load profiles. These forecasts are called "schedules" or "profiles" and must be registered with the transmission system operator the day before the amount of electricity is produced or drawn. If these profiles are not adhered to, for example if a large steel factory consumes more electricity than forecast, the much more expensive balancing energy must be purchased to make up the difference from the original profile. In order to avoid these costs and to be able to adhere to the schedules even in the case of short-term fluctuations, intraday trading offers the possibility to buy or sell energy during the same day of delivery. In the quarter-hour opening auction on the day before provision, a quantity of energy can be bought and sold for the respective 15min interval of the following day in order to keep to one's own schedules as closely as possible. If, for example, the weather forecast changes at short notice on the previous day, this auction can be used to react to this. After the opening auction, trading can continue in continuous quarter-hourly or hourly trading up to 30 minutes before physical provision throughout Germany. In this way, it is also possible to react to extremely short-term fluctuations. The smallest energy quantity for trading on the intraday markets is 0.1 MWh. The price is formed according to bids and is called bid price. Contracts which are concluded only 30 minutes before delivery or contracts for only 15 minutes allow an enormous flexibility of the electricity market. However, this is also absolutely necessary due to the strongly weather-dependent renewable energies. It offers renewable energy producers in particular the opportunity to take better account of short-term weather forecasts in their calculations and to make offers that are as realistic as possible.

How do price peaks occur?

A simple model of the origin of electricity prices is the merit order. It sorts power plants according to their marginal costs. The most expensive power plant that is called upon to cover the load determines the current electricity price. The higher the demand, the more expensive power plants have to be used to meet the electricity demand. Renewable energy sources are very cheap sources of energy. During the day, therefore, PV plants, for example, reduce the price of electricity. In low-wind mornings and evenings, on the other hand, very expensive peak-load power plants are already used and generate very high price peaks. More PV generation will further reduce the price of electricity at midday, while the elimination of conventional generation will increase price peaks in the morning and evening. From this, the relationship between renewable generation and storage behavior becomes apparent. During times of high renewable generation, storage is charged. At times of low renewable feed-in (i.e., times of increased exchange electricity prices), the storage facilities feed energy back into the grid, increasing supply in the electricity market. Since pricing is determined by supply and demand, the injection of storage leads to a smoothing of price peaks.

How does the energy transition affect intraday trading of battery storage?

Due to the growing share of renewable energies, the trading volume on the European power exchange EPEX Spot is rising sharply, as larger volumes in the balancing groups of suppliers and producers have to be balanced at short notice. Germany is the growth driver here and has a more than 50% share of the trading volume on EPEX Spot. In order to achieve Germany's climate targets, wind power and photovoltaics are to continue to be strongly expanded. According to the German government's 2020 Easter Package, installed capacity of 215 GW for photovoltaics and 115 GW for wind power is to be achieved by 2030. The share of volatile generation will thus continue to rise sharply, whereas the majority of the conventional generation fleet (nuclear and coal-fired power plants) will be taken off the grid in the next few years. At the same time, this will reduce the share of plannable generation capacity, which will further increase the need for storage and thus the revenue potential in the coming years.