Intraday Trading


Since the advent of renewable energies, spot markets, on which short-term electricity procurement is handled, have rapidly gained in importance. As a flexible trading venue, the spot market offers quarter-hour contracts for the following day. It also enables continuous trading, where electrical energy can be traded up to a few minutes before physical delivery.

The main purpose of intraday trading is to keep surplus or shortfall quantities of balancing groups as low as possible through short-term trading on the exchange, in order to comply with previously issued forecasts. In this way, it is possible to counteract unforeseen changes in electricity production before having to resort to balancing energy, which is only intended to serve as a safety reserve.

How does intraday trading work?

In general, the quantities of electricity that are 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 electricity is generated or consumed. If these profiles are not adhered to, for example if a large steel factory consumes more electricity than forecast, the significantly more expensive balancing energy must be purchased to make up the difference to the original profile.
In order to avoid these costs and to be able to adhere to the schedules even in the event of short-term fluctuations, intraday trading offers the option of buying or selling energy during the same day of generation.

In the quarter-hour opening auction on the day before the provision, a quantity of energy can be bought and sold for the respective 15min interval of the following day, in order to adhere as closely as possible to one's own schedules. If, for example, the weather forecast changes at short notice on the previous day, this can be reacted to in this auction.

After the opening auction, trading can continue in continuous quarter-hourly or hourly trading up to 30 min 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 the bid price.

Contracts that are concluded just 30 minutes before delivery or contracts for just 15 minutes enable enormous flexibility in the electricity market. flexibility of the electricity market. However, this is also absolutely essential due to the strong dependence of renewable energies on the weather. It offers renewable energy producers in particular the opportunity to better take short-term weather forecasts into account in their calculations and to make offers that are as realistic as possible.

How does intraday trading with large-scale battery storage systems work?

In an energy market with a high share of renewables, forecasts of supply are very complex due to imperfect weather forecasts and an increasing share of solar and wind energy that fluctuates over time. Here, the intraday market allows for short-term correction of shortages and surpluses. Price volatility on the spot markets in Germany, France and Switzerland has increased dramatically in recent years, making flexibility increasingly valuable for the power grid, especially given the ambitious expansion targets for renewables. Increasing volatility is leading to rising price spreads. Negative prices occur more frequently on spot markets, although the price level is generally very high.

As extremely responsive energy storage systemsThese extremely volatile price fluctuations enable the large-scale battery storage system to participate profitably in intraday trading.
In addition to the balancing energy markets, the intraday trading market is one of the other revenue streams of a large-scale battery storage system and part of the multi-use strategy of a storage system. This allows the storage system to choose the most lucrative market depending on the situation and to become active in this market.

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. Renewables are on the far left of the merit order in Germany because the Renewable Energy Sources Act mandates prioritization of renewable generation. The elimination of lignite and hard coal, as well as nuclear power, makes the merit order much steeper. The addition of renewables broadens the plateau with low prices.

The higher the electricity demand, the more expensive power plants have to be used. Renewable energies are very cheap energy sources. During the day, PV plants, for example, therefore reduce the price of electricity. In low-wind morning and evening hours, very expensive peak-load power plants are already used (shown below as an example for 09.07.2022) and generate very high price peaks. More PV generation will further reduce the price of electricity at midday, while the elimination of conventional generation components will increase price peaks in the morning and evening.

The example of week 27 in 2022 clearly shows the connection between renewable feed-in and the price of electricity on the exchange. The following figure simulates the behavior of storage in an exemplary week in the German power grid. This shows the connection between renewable generation and storage behavior. During times of high renewable generation, storage facilities are charged. At times of low renewable feed-in (i.e., at times of increased exchange electricity prices), the storages feed energy back into the grid and thus increase the supply on 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 large-scale 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 need to be balanced at short notice. Germany is driving this growth and accounts for over 50% of the trading volume on EPEX Spot. In order to achieve Germany's climate targets, wind power and photovoltaics are to be further expanded significantly. According to the German government's Easter package from 2020, installed photovoltaic capacity of 215 GW for photovoltaics and 115 GW for wind power by 2030. The proportion of volatile generation will therefore continue to rise sharply, while the majority of conventional generation (nuclear and coal-fired power plants) will be taken off the grid in the coming years. At the same time, the share of plannable generation capacity will decrease, which will further increase the need for storage and thus the revenue potential in the coming years.

What trading methods does a large-scale battery storage system follow in the intraday market?

Arbitrage trading

The day-specific consumption behavior of consumers and the fluctuating generation of RE plants during the course of the day lead to different energy prices. Short-term storage such as large-scale battery storage can buy energy cheaply in a 15-minute interval and sell it more expensively at a later time.

Swing trading

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 it is actually delivered. The same 15-minute contract can therefore be bought and sold several times at a profit before the trading algorithm makes the final decision as to whether the amount of energy should be physically stored.