Low liquidity contributed to German power intra-day price spike mystery

Low liquidity contributed to a spike in the German intra-day auction price for a brief 15-minute slot on 26 September, according to market sources.

A range of other factors also contributed, data and anecdotal evidence suggests, including a wind power revision, a late demand increase relative to forecasts and participant behaviour.

Such intra-day spikes could become less frequent if liquidity at the auction continues to improve, but recent sharp gains on the German power forward market indicate that intra-day price peaks might be high over this winter.

The 26 September spike occurred at the 21:00-21:15 central European time slot, when prices reached €94.82/MWh at the German intra-day auction held by the EPEX SPOT exchange.

The auction price had reached such a high level for a 15-minute window on only two days previously this year.

Market sources were unable to say what had caused the spike at the time.

Prices were below €60.00/MWh for the 15-minute slots immediately preceding and following the spike. It is unusual for the prices of adjacent slots to be so different.

Such unusual price movements could be caused by a change in the behaviour of a single large market participant, ICIS power market analyst Viktor Wolf said. For example, a participant might have forgotten to place an offer or bid at the auction. “I don’t think there’s a fundamental reason [for the spike],” Wolf said.

Because liquidity at the intra-day auction is not high, a change in the behaviour of a large market participant could indeed affect prices significantly, a trader at a renewable energy company said.

Another trader, based at a German regional utility, had a similar view. “Sometimes there is not much power offered at this 15-minute auction, so only a small change in the merit order could lead to price spikes,” he said.

Other reasons

Low wind power generation was also a driver for high intra-day prices, but this alone could not have caused such a spike, the second trader said.

A downward revision of wind power forecasts between day-ahead and intra-day auctions might have at least contributed to the spike.

Such a revision took place for delivery in hour 21 on 26 September, ICIS forecasts indicate. Wind power expectations dropped by 397MW, or 29%, to 983MW, based on ICIS forecasts. Such a drop would have been largely insignificant if it happened from a baseline of several gigawatts, but in this case the revision was sharp because wind power was meant to be low already before the downgrade.

Higher-than-expected power demand might have also exaggerated the spike. Germany’s load was 58GW at 21:00-21:15 on 26 September, 1.2GW higher compared to the day-ahead forecast, according to European Network of Transmission System Operators for Electricity data.

Additionally, high balancing prices might have contributed to the spike, the first trader said. Higher balancing prices increase the motivation of market participants to avoid imbalance charges and place higher bids during intra-day trading.

Outlook

German forward contracts have pushed markedly higher in several sessions recently, mostly due to concerns about nuclear availability in neighbouring France.

French nuclear issues are likely to increase the average German intra-day price over the winter, the first trader said.

The French supply situation would not have a direct impact on the German intra-day auction because the two markets are not coupled in this time segment. But there could be indirect impacts as market participants might change their bidding behaviour at the auction based on the day-ahead auction and the continuous intra-day market, where Germany and France are coupled, Wolf said.

Relatively high German intra-day prices in week 39 are likely to occur again over the winter, the first trader said.

Last winter, German intra-day auction prices reached above €100.00/MWh on one day. Such a level can definitely be reached again in the coming winter, the second trader said. laura.raus@icis.com