Innovations in the spot market - and a review of a glitch
More and more electricity is being produced in renewable energy plants. Regulatory adjustments and new markets or products are required in order to integrate these into the market as efficiently as possible. The role of the electricity exchanges is of central importance here. This was particularly evident in the summer when there was a breakdown at EPEX. We look forward - and back.
November 2024
Although the energy industry has been in a political and regulatory holding pattern since the premature end of the traffic light coalition, a lot has happened in the field of renewable energies in recent years: the rapid expansion of wind power and photovoltaics, the sharp increase in battery storage, grid expansion, Redispatch 2.0, new processes in market communication - to name just a few. Everything is aimed at the decarbonisation, decentralisation and digitalisation of the electricity market. In order to meet the increased demands for flexibility and sustainability, the electricity exchanges are also leading the way.
EPEX Spot every quarter of an hour - 96 is the new 24
The EPEX Spot power exchange is introducing new products to increase flexibility, including shorter trading intervals and extended trading hours.
At the end of the 1st quarter, the Paris-based exchange is changing the submission grid for the day-ahead auction on the electricity market from hourly bids to quarter-hourly bids. The switch to quarter-hour trading is an obligation under the Clean Energy Package and applies to all Nominated Electricity Market Operators (NEMOs) participating in single day-ahead coupling. This means that a total of 96 instead of 24 products are traded on the day-ahead market.
As the clock in the German electricity system is the quarter of an hour, this step is important. In particular, the ever-improving, quarter-hourly forecasts for renewable energies can then be traded in the day-ahead auction. Currently, after the day-ahead auction at 12 noon, every market participant must take part in a further quarter-hour auction at 3 pm (IDA1) so that procurement and marketing can take place on a quarter-hourly basis and they can fulfil their balancing group obligations. In future, the IDA1 auction would no longer be necessary and the quarter-hourly intraday trading could also be relieved. In view of the fact that transmission system operators (TSOs) are also billed on a quarter-hourly basis, the conversion of EPEX Spot to quarter-hourly trading will simplify procurement for many market participants.
On the other hand, market participants must implement extensive technical and contractual changes in this sensitive area. There is still enough time to adapt and test their own systems.
Decoupling on the EPEX Spot
In this already challenging situation, an event occurred on EPEX Spot on 25 June that was a first even for experienced market participants: technical problems led to a decoupling of individual electricity markets. This decoupling led to extreme price differences between the various markets: The EPEX spot price for Germany was 492.04 EUR/MWh and for France 2.96 EUR/MWh.
The reason for the decoupling was a brief interruption in the power supply at the primary EPEX Spot data centre. This led to instabilities in the communication between the trading system and the central database. Despite the backup systems in place, the problem could not be resolved quickly enough, which led to delays in the transmission of market results and ultimately to the extreme price fluctuations.
The impact of this event was far-reaching and market participants had to adapt quickly to the new conditions. At the same time, this event illustrates the complexity of modern electricity markets and the importance of the interconnected system and market coupling.
Do you have questions about the changes in the spot market? Please get in touch with us!
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