Can grid losses be traded?
Pilot project with Vattenfall market access
In the past, network operators procured their network loss energy mainly through tenders. However, a sometimes small selection of offers leads to high prices and thus represents a risk. One grid operator is now taking a different approach and using our Energy Trader market access to do so.
October 2023
Network losses are a physically determined phenomenon - they refer to the difference between generated electrical power and the actual usable power at the connection point of a consumer. Transmission losses are caused by power resistances.
Grid operators are obliged to compensate for the grid loss energy. In tenders, participants submit bids on the load profiles transmitted by the network operators, and the network operators commission the supplier with the most attractive bid.
Network loss procurement is costly
Since trading in load profiles represents an increased price risk, the circle of suppliers is thinning out more and more. Vattenfall Energy Trading has also withdrawn from this business. The shortage on the supply side leads to increased prices if demand remains constant. Complex processes in the loss energy tenders, in which binding periods, among other things, must be observed, lead to additional risk premiums.
Alternative: Network loss procurement via market access
Due to the described disadvantages, EAM Netz GmbH from Kassel was looking for an alternative to conventional tenders. Together we developed the possibility for EAM to create a digital access to the OTC futures market with the Energy Trader. The advantages are obvious: EAM can trade the required energy volumes on the electricity market on a long-term basis and has access to around 250 trading partners via Vattenfall's trading infrastructure. We pass through the market prices on a 1:1 basis and instead of a hidden price mark-up, we agree on a service fee in cents/megawatt-hour with the user of market access.
Non-discriminatory and officially approved
It was important to EAM that the new approach was legally unobjectionable. The German Federal Network Agency has confirmed that this alternative approach to procuring loss energy is non-discriminatory and has given its approval for it.
The project has now been in live operation since August 2023 and EAM is procuring the required electricity via the exchange-like environment of Vattenfall Market Access. In parallel, there are already ongoing negotiations with other network operators who would also like to use our market access to manage their loss energy portfolio.
Do you have questions about Energy Trader or the procurement of grid losses? Feel free to contact us!
<a class="arrow">energysales@vattenfall.de</a> und <a class="arrow">renewables@vattenfall.de</a>
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