Intraday auctions: A finer reference price
The way we produce electricity is changing – and so are the tools for energy trading. The key question: how do you calculate a reference price when energy production is intermittent? The answer: Intraday auctions with smaller contracts.
2020 marks the first time in EU’s history that renewable energy sources overtook fossil fuels in electricity production. It is another milestone in the transformation of the way electricity is produced in Europe – and on the way towards decarbonization of the energy industry.
New sources, new trading needs
The way we produce electricity has a significant impact on the way we trade it. As electricity is difficult to store, production needs to match consumption constantly, and this matchmaking is one central function of the organised market. For a long time, hourly contracts were the gold standard – which worked perfectly fine in a world of plannable, fossil-fuelled power plants.
However, with the increase of intermittent production from renewables, hourly contracts can only draw a rough picture of the actual production curve. This is why already in 2011, EPEX SPOT introduced 15-minute contracts on the German continuous Intraday market, followed by 15-minute contracts on continuous markets in Austria and Switzerland shortly after – a blasting success story.
A price signal for renewable production
Soon, another demand arose from market participants. The Day-Ahead auction provides a reliable price signal on an hourly basis – but what about the 15-minute timeframes? In close cooperation with members, EPEX SPOT developed a combination of the Day-Ahead market design and adapted it to the needs of the renewable energy producers: the Intraday auction.
In 2014, the first Intraday auction with 96 quarterly contracts of the following day launched in Germany, followed by Intraday auctions in Great Britain and Switzerland. Due to their timeframe just at the start of the continuous market at 4pm, these Intraday auctions provide a reliable price signal with regards to the production of electricity from renewables.
The energy transition isn’t limited to certain countries in Europe
Intraday auctions across Central Western Europe
The energy transition isn’t limited to certain countries in Europe – the need for Intraday auctions is growing in the light of the EU Green Deal. On 14 October 2020, EPEX SPOT introduced Intraday auctions in Austria, Belgium, France and the Netherlands. These products complement the already existing local 15-minute Intraday auction in Germany, the coupled 30-minute Intraday auctions in Great Britain as well as the coupled 60-minute Intraday auctions in Switzerland.
In Austria, Belgium and the Netherlands, 15-minute contracts are tradable, 30-minute contracts are available in France. The Austrian, Belgian and Dutch order books close at 15:00 CET and the 96 quarter hours of the following day are traded. The French order books close at 14:30 CET, with 48 half-hourly contracts for delivery on the following day.
Our contribution to decarbonisation
The Intraday auctions launched in 2020 complete the suite across Central Western Europe, Great Britain and Switzerland. They play a key role in providing further granularity and balancing opportunities. In a market with an increasing number of renewable assets, Intraday auctions are essential in facilitating a cost-efficient energy transition and delivering a reliable reference price.
And they are already a true success story: since their launch, there has been a significant increase in liquidity on the Intraday auction segments. In 2020, a total of 10,444.9 GWh were traded on the EPEX Intraday auctions, a 23.9% growth on year.
