Quicker solar power output changes probably caused German intra-day prices to have more upside at the end of August than the Day-ahead, traders said.
Prices at the German 15-minute intra-day auction, held by the EPEX SPOT exchange, increased above €53.00/MWh towards the end of August, which was the first time this had happened since May.
In contrast, the EPEX SPOT Day-ahead Baseload did not cross the €33.00/MWh mark in August, as it had done in June and July.
Intra-day prices had more upside due to seasonal changes in solar power output shape, a trader at a solar energy company said. These changes, in combination with Germany’s market setup, might have caused price peaks to climb.
With the sun rising and setting more quickly after mid-summer, the daily solar output shape typically gets steeper, at least on days when solar power peaks are still high.
Sharp solar changes within an hour can increase the need of solar energy producers to trade on the intra-day market. This is because the smallest unit that can be traded on the day-ahead market is one hour, but German market participants need to be balanced in every 15 minutes.
Solar producers often sell their average hourly generation on the day-ahead market, but this leaves them long for the first quarter and short for the last quarter of the hour if their output declines throughout this period with sun setting.
Intra-day auction prices have reached above €53.00/MWh on several days recently. On all these days, the highest price has occurred for the 19:45-20:00 slot CET time. This is shortly before solar output drops to zero.
“That could be a good explanation,” an intra-day trader at a European energy trading company said about solar shape changes causing higher intra-day price peaks. “I haven’t heard any other explanation.”
Such an effect is at its strongest in spring and autumn, the first trader said. This is when solar tends to be quite high, but the sun rises and sets more quickly than in the summer.
Evening intra-day peaks can also be amplified by seasonal demand shape changes, the trader said. With days shortening, people tend to switch lights on earlier, which supports demand.
German intra-day prices were fairly stable from June until the second half of August. Not only price peaks, but also their downside was muted.
The prices have had consistently more upside in recent weeks and this is set to continue. Intra-day auction prices are next set to reach above €53.00/MWh on Monday evening, according to an ICIS forecast from Thursday afternoon.
Intra-day prices tend to be more volatile in the winter season, the first trader said. Wind power tends to be higher then and might cause extremely negative prices on Sundays and public holidays. Meanwhile, demand could be high due to cold weather and prices could spike if this coincides with low renewables.
“We will see more volatility now [than in the summer] until the next spring,” the second trader said.
Germany’s quickly growing wind power capacity could potentially cause prices to be more volatile this winter than during the previous one. However, renewables growth has not led to considerably higher volatility of German short-term prices in recent years because the market has learnt to cope better with the variability of wind and solar power output. For example, thermal power plants have started adjusting their generation levels more to renewables forecasts and short-term prices.
Considering this, German intra-day price volatility might be more or less at the same level in the coming winter than it was in the previous one, the second trader said. firstname.lastname@example.org