Intraday Markets: Real Money in near Real Time

Post by admin on November 3, 2017

The past years have seen an emergence of renewable electricity generation which caused a shift to short-term and intraday trading. Traders use the intraday market to optimize their position to reduce risks associated with unexpected imbalance prices charged by the TSOs, while others see the Intraday Market as an important tool for their portfolio management. Renewable generation is less predictable, introducing volatility, where positions may change rapidly and decisions are based on multiple information sources. To manage exposures and capitalize on opportunities, it requires a live, real-time system with automated market connections to the SPOT markets; Intraday Markets: Real Money in near Real Time!

Market participants had little choice but to shake up their operations, reinventing and positioning themselves to find new growth categories. Unpredictable renewable generation, decentralization in power and gas markets, along with EU policies for a single market, have all been reasons why power trading in Europe shifted to focus on short-term markets. Several power exchanges, such as EPEX SPOT, offer continuous intraday trading environments to facilitate this. It not only allows utilities and trading firms to balance their portfolios and take advantage of market opportunities, but also forces them to respond faster both to minimize losses and to capitalize on price changes.

The traditional ETRM solutions are not designed to support the requirements where pre-deal and what-if risk scenarios are expected to calculate within 1-2min max. Where import and processing of exchange trades for viewing takes seconds. And triggered by those new deals, hourly positions are recalculated in seconds with updated Mark-to-Market reporting following 2 minutes later.

Clearly an environment where time is money and this calls for solid real-time automation and integration with markets, which is not what legacy ETRM solutions are equipped to support.

Traders and portfolio managers and their colleagues in risk management, need to have access to have the information about their business at their fingertips, as the time to manage a position for intraday trading is getting shorter. And this information is coming from multiple information sources, from power generation, load projections, weather, planned and unexpected outages, transmission capacity and more. Those not being organized and automated can’t keep up and will miss out and/or pay more than was necessary.

Consider balancing markets with 15-minute or less intervals. Not being able to visualize that data in an accurate position and being able to act on it may deliver unexpected imbalance charges from the grid operator.  Also, while not very common, negative prices occur when a high inflexible power generation meets low demand. Inflexible power sources can’t be shut down and when the demand is low the prices can fall below zero. When this happens, buyers do get money and electricity from sellers.

This requires to be able to rapidly react on those changes in the market, analyse scenarios of placing bids and offers while understanding the cost or profit impact. Time is of the essence and therefore easy access to reporting that visualize the opportunities is a prerequisite.

ETRM systems that are ‘live’ with a robust integration capability provide the level of automation that can reduce the burden on the traders and portfolios managers: market information gets fed in, exchange trades imported, and position management reporting delivered timely and accurate to their workstation. All in near-real time, for real money!

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