Multi-Market Trading with Flexible Customer Assets

Multi-market trading, the art and science of strategically participating in different energy markets—day-ahead, intraday, and imbalance markets—allows traders to not only maximize the economic but also the system value of flexible customer assets, such as heat pumps, PV, batteries and electric vehicles. Let’s explore how flexible customer assets can thrive in this landscape.

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Multi-market trading to balance demand and supply

Energy suppliers act as balancing responsible parties (BRP) that need to balance the demand and supply in their portfolio for every 15-minute period. To ensure this balance while minimizing their energy procurement costs, energy suppliers are continuously making trade-offs on the volumes bought and sold on different energy markets. Years ahead of real time, they typically buy their baseload energy on forward markets. In the day-ahead wholesale energy market, energy is bought or sold at an hourly resolution based on day-ahead forecasts of load and production. As new load and production forecasts become available within the day, the intraday auctions and continuous intraday market provide opportunities to reposition their portfolio.

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Imbalance management

If the BRP ends up with an unbalanced position in real time, the imbalance volume gets settled at the imbalance price, which reflects the TSO’s cost of balancing the system using ancillary services, such as frequency containment response and frequency restoration reserves. In single imbalance price systems, such as in Belgium, or mixed imbalance price systems, such as in The Netherlands, BRPs may voluntarily take an unbalanced position. During periods with excessively high single imbalance prices, creating an imbalance in a direction that helps reduce the overall system imbalance can be a huge cost saver for suppliers. An intentional imbalance can be created for instance by preheating homes or curtailing PV production during very negative imbalance price periods.

As also raised in [1], although creating intentional portfolio imbalance can be a cost-effective strategy from a trading perspective, it also comes with risks for the stability of the grid, especially when many traders pursue the same strategy on the same price forecasts and public signals. A deep and liquid continuous intraday market combined with appropriate market regulation can overcome the risk of unwanted price oscillations. In contrast to open loop imbalance price reactions, the continuous intraday market relies upon pay-as-bid two-sided trades that are executed continuously.

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Risk management

Traders typically continuously monitor and manage their imbalance risk. For instance, when voluntarily taking an unbalanced position to capture a favourable imbalance price in real time, the portfolio deviates from its schedule, creating a risk for unintended imbalance volumes and potentially high imbalance costs due to a lack of flexibility later in time. To manage imbalance cost risks, multi-market trading will consider opportunities for repositioning the portfolio on the continuous intraday market. Due to its continuous nature, the continuous intraday market also provides opportunities for speculative, asset-backed swing trading. This boils down to buying and selling energy for a given settlement period at different moments in time while having the flexibility of their portfolio as a hedge against high imbalance costs if no compensating buy or sell opportunity arises in the future.

To properly manage their risks, traders should have an up-to-date view on the flexibility available now and in the future. However, they do not want to deal with the complexity of managing millions of small customer devices, which is where advanced orchestration technology comes to the rescue.

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Embedding customer flexibility

Orchestration technology with simple, single-asset-representation trading integrations pave the way to integrate low-cost custom flexibility in multi-market trading. Such orchestration technology facilitates the scalable integration of customer flexibility in trading. Beebop’s orchestration technology makes the flexibility of millions of customer devices available to the trading desk through a simple, single-asset-representation trading integration. The integration gives traders low-complexity, but comprehensive and actionable visibility on the flexibility available in the customer assets now and in the future. This allows energy suppliers to use customer flexibility to its full potential for cost effective portfolio balancing across different energy markets, creating opportunities for significant energy bill reductions.

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Interested to know how Beebop can help you in creating value with your end-users’ customer flexibility in multi-market trading? Book a demo!

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References

[1] Online: https://dexterenergy.ai/news/market-impact-in-short-term-power-trading/