Flexible Short-Term Electricity Certificates—An Analysis of Trading Strategies on the Continuous Intraday Market

Abstract

The most important price for short-term electricity trading in Germany is the day-ahead auction price, which is provided by EPEX SPOT. Basically, short-term fluctuating electricity prices allow cost-optimized production planning by shifting electricity-intensive processes to times of favorable electricity prices. However, the day-ahead price as the outcome of an auction is not directly tradeable afterwards. We propose short-term flexible electricity certificates that pass on the day-ahead auction prices plus a premium for the supplier, enabling users to plan electricity consumption based on realized day-ahead auction prices. We analyze the supplier’s problem of delivering electricity based on such certificates. The supplier can adjust the required electricity volume after the close of the day-ahead auction on the continuous intraday market. We analyze the price fluctuations in this market in relation to the day-ahead price and propose different trading strategies. Using the order book history of EPEX SPOT, we analyze the trading success and risk of these strategies. Furthermore, we investigate to what extent trading success can be explained by changes in market conditions, and, in particular, we identify renewable forecast errors as a driver.

Navigating Energy and Financial Markets: A Review of Technical Analysis Used and Further Investigation from Various Perspectives

“…Empirical energy and financial studies utilize various data frequencies, such as intraday, daily, weekly, and monthly, offering unique insights into market behavior [116]. Intraday data, with its high frequency, provide a granular view of market dynamics, enabling researchers to analyze price movements and volatility patterns within a single trading day [117]. This level of detail is beneficial for studying market microstructure, including price discovery mechanisms and the impact of high-frequency trading.…”