IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v15y2022i17p6344-d902361.html
   My bibliography  Save this article

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

Author

Listed:
  • Rainer Baule

    (Chair of Banking and Finance, University of Hagen, Universitätsstraße 41, 58084 Hagen, Germany)

  • Michael Naumann

    (Chair of Banking and Finance, University of Hagen, Universitätsstraße 41, 58084 Hagen, Germany)

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.

Suggested Citation

  • Rainer Baule & Michael Naumann, 2022. "Flexible Short-Term Electricity Certificates—An Analysis of Trading Strategies on the Continuous Intraday Market," Energies, MDPI, vol. 15(17), pages 1-28, August.
    • Handle: RePEc:gam:jeners:v:15:y:2022:i:17:p:6344-:d:902361
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/15/17/6344/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/15/17/6344/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ziel, Florian & Steinert, Rick, 2016. "Electricity price forecasting using sale and purchase curves: The X-Model," Energy Economics, Elsevier, vol. 59(C), pages 435-454.
    2. Arthur Henriot, 2014. "Market Design with Centralized Wind Power Management: Handling Low-predictability in Intraday Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Benedikt Finnah, 2022. "Optimal bidding functions for renewable energies in sequential electricity markets," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(1), pages 1-27, March.
    4. Serafin, Tomasz & Marcjasz, Grzegorz & Weron, Rafał, 2022. "Trading on short-term path forecasts of intraday electricity prices," Energy Economics, Elsevier, vol. 112(C).
    5. Christopher Koch & Philipp Maskos, 2020. "Passive Balancing Through Intraday Trading: Whether Interactions Between Short-term Trading and Balancing Stabilize Germany s Electricity System," International Journal of Energy Economics and Policy, Econjournals, vol. 10(2), pages 101-112.
    6. Maciejowska, Katarzyna & Nitka, Weronika & Weron, Tomasz, 2021. "Enhancing load, wind and solar generation for day-ahead forecasting of electricity prices," Energy Economics, Elsevier, vol. 99(C).
    7. Rainer Baule & Michael Naumann, 2021. "Volatility and Dispersion of Hourly Electricity Contracts on the German Continuous Intraday Market," Energies, MDPI, vol. 14(22), pages 1-24, November.
    8. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    9. Florian Ziel & Rick Steinert, 2015. "Electricity Price Forecasting using Sale and Purchase Curves: The X-Model," Papers 1509.00372, arXiv.org, revised Aug 2016.
    10. Rafal Weron & Florian Ziel, 2018. "Electricity price forecasting," HSC Research Reports HSC/18/08, Hugo Steinhaus Center, Wroclaw University of Science and Technology.
    11. Fatih Karanfil and Yuanjing Li, 2017. "The Role of Continuous Intraday Electricity Markets: The Integration of Large-Share Wind Power Generation in Denmark," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    12. Christopher Kath, 2019. "Modeling Intraday Markets under the New Advances of the Cross-Border Intraday Project (XBID): Evidence from the German Intraday Market," Energies, MDPI, vol. 12(22), pages 1-35, November.
    13. Fatih Karanfil and Yuanjing Li, 2017. "The Role of Continuous Intraday Electricity Markets: The Integration of Large-Share Wind Power Generation in Denmark," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    14. Ziel, Florian & Weron, Rafał, 2018. "Day-ahead electricity price forecasting with high-dimensional structures: Univariate vs. multivariate modeling frameworks," Energy Economics, Elsevier, vol. 70(C), pages 396-420.
    15. Scharff, Richard & Amelin, Mikael, 2016. "Trading behaviour on the continuous intraday market Elbas," Energy Policy, Elsevier, vol. 88(C), pages 544-557.
    16. Pape, Christian, 2018. "The impact of intraday markets on the market value of flexibility — Decomposing effects on profile and the imbalance costs," Energy Economics, Elsevier, vol. 76(C), pages 186-201.
    17. Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-787, October.
    18. Ramiz Qussous & Nick Harder & Anke Weidlich, 2022. "Understanding Power Market Dynamics by Reflecting Market Interrelations and Flexibility-Oriented Bidding Strategies," Energies, MDPI, vol. 15(2), pages 1-24, January.
    19. Andreas Dellnitz & Damian Braschczok & Jonas Ostmeyer & Markus Hilbert & Andreas Kleine, 2020. "Energy costs vs. carbon dioxide emissions in short-term production planning," Journal of Business Economics, Springer, vol. 90(9), pages 1383-1407, November.
    20. Narajewski, Michał & Ziel, Florian, 2020. "Econometric modelling and forecasting of intraday electricity prices," Journal of Commodity Markets, Elsevier, vol. 19(C).
    21. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    22. Shlomo Benartzi & Richard H. Thaler, 1999. "Risk Aversion or Myopia? Choices in Repeated Gambles and Retirement Investments," Management Science, INFORMS, vol. 45(3), pages 364-381, March.
    23. Clara Balardy, 2022. "An Empirical Analysis of the Bid-ask Spread in the Continuous Intraday Trading of the German Power Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    24. Jochen Gönsch & Michael Hassler, 2016. "Sell or store? An ADP approach to marketing renewable energy," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(3), pages 633-660, July.
    25. Wozabal, David & Rameseder, Gunther, 2020. "Optimal bidding of a virtual power plant on the Spanish day-ahead and intraday market for electricity," European Journal of Operational Research, Elsevier, vol. 280(2), pages 639-655.
    26. Marijanovic, Zorica & Theile, Philipp & Czock, Berit Hanna, 2022. "Value of short-term heating system flexibility – A case study for residential heat pumps on the German intraday market," Energy, Elsevier, vol. 249(C).
    27. Pape, Christian & Hagemann, Simon & Weber, Christoph, 2016. "Are fundamentals enough? Explaining price variations in the German day-ahead and intraday power market," Energy Economics, Elsevier, vol. 54(C), pages 376-387.
    28. Kuppelwieser, Thomas & Wozabal, David, 2021. "Liquidity costs on intraday power markets: Continuous trading versus auctions," Energy Policy, Elsevier, vol. 154(C).
    29. Sergei Kulakov and Florian Ziel, 2021. "The Impact of Renewable Energy Forecasts on Intraday Electricity Prices," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rainer Baule & Michael Naumann, 2021. "Volatility and Dispersion of Hourly Electricity Contracts on the German Continuous Intraday Market," Energies, MDPI, vol. 14(22), pages 1-24, November.
    2. Narajewski, Michał & Ziel, Florian, 2020. "Ensemble forecasting for intraday electricity prices: Simulating trajectories," Applied Energy, Elsevier, vol. 279(C).
    3. Katarzyna Maciejowska & Bartosz Uniejewski & Rafa{l} Weron, 2022. "Forecasting Electricity Prices," Papers 2204.11735, arXiv.org.
    4. Micha{l} Narajewski & Florian Ziel, 2020. "Ensemble Forecasting for Intraday Electricity Prices: Simulating Trajectories," Papers 2005.01365, arXiv.org, revised Aug 2020.
    5. Micha{l} Narajewski & Florian Ziel, 2021. "Optimal bidding in hourly and quarter-hourly electricity price auctions: trading large volumes of power with market impact and transaction costs," Papers 2104.14204, arXiv.org, revised Feb 2022.
    6. Petropoulos, Fotios & Apiletti, Daniele & Assimakopoulos, Vassilios & Babai, Mohamed Zied & Barrow, Devon K. & Ben Taieb, Souhaib & Bergmeir, Christoph & Bessa, Ricardo J. & Bijak, Jakub & Boylan, Joh, 2022. "Forecasting: theory and practice," International Journal of Forecasting, Elsevier, vol. 38(3), pages 705-871.
      • Fotios Petropoulos & Daniele Apiletti & Vassilios Assimakopoulos & Mohamed Zied Babai & Devon K. Barrow & Souhaib Ben Taieb & Christoph Bergmeir & Ricardo J. Bessa & Jakub Bijak & John E. Boylan & Jet, 2020. "Forecasting: theory and practice," Papers 2012.03854, arXiv.org, revised Jan 2022.
    7. Narajewski, Michał & Ziel, Florian, 2022. "Optimal bidding in hourly and quarter-hourly electricity price auctions: Trading large volumes of power with market impact and transaction costs," Energy Economics, Elsevier, vol. 110(C).
    8. Katarzyna Maciejowska, 2022. "A portfolio management of a small RES utility with a Structural Vector Autoregressive model of German electricity markets," Papers 2205.00975, arXiv.org.
    9. Simon Hirsch & Florian Ziel, 2022. "Simulation-based Forecasting for Intraday Power Markets: Modelling Fundamental Drivers for Location, Shape and Scale of the Price Distribution," Papers 2211.13002, arXiv.org.
    10. Ioannis Boukas & Damien Ernst & Thibaut Th'eate & Adrien Bolland & Alexandre Huynen & Martin Buchwald & Christelle Wynants & Bertrand Corn'elusse, 2020. "A Deep Reinforcement Learning Framework for Continuous Intraday Market Bidding," Papers 2004.05940, arXiv.org.
    11. Janczura, Joanna & Wójcik, Edyta, 2022. "Dynamic short-term risk management strategies for the choice of electricity market based on probabilistic forecasts of profit and risk measures. The German and the Polish market case study," Energy Economics, Elsevier, vol. 110(C).
    12. Philip Beran & Arne Vogler, 2021. "Multi-Day-Ahead Electricity Price Forecasting: A Comparison of fundamental, econometric and hybrid Models," EWL Working Papers 2102, University of Duisburg-Essen, Chair for Management Science and Energy Economics, revised Oct 2021.
    13. Ziel, Florian & Steinert, Rick, 2018. "Probabilistic mid- and long-term electricity price forecasting," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 251-266.
    14. Grzegorz Marcjasz & Tomasz Serafin & Rafał Weron, 2018. "Selection of Calibration Windows for Day-Ahead Electricity Price Forecasting," Energies, MDPI, vol. 11(9), pages 1-20, September.
    15. Umut Ugurlu & Ilkay Oksuz & Oktay Tas, 2018. "Electricity Price Forecasting Using Recurrent Neural Networks," Energies, MDPI, vol. 11(5), pages 1-23, May.
    16. Thomas Kuppelwieser & David Wozabal, 2023. "Intraday power trading: toward an arms race in weather forecasting?," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(1), pages 57-83, March.
    17. Uniejewski, Bartosz & Marcjasz, Grzegorz & Weron, Rafał, 2019. "On the importance of the long-term seasonal component in day-ahead electricity price forecasting: Part II — Probabilistic forecasting," Energy Economics, Elsevier, vol. 79(C), pages 171-182.
    18. Hu, Xiao & Jaraitė, Jūratė & Kažukauskas, Andrius, 2021. "The effects of wind power on electricity markets: A case study of the Swedish intraday market," Energy Economics, Elsevier, vol. 96(C).
    19. Peru Muniain & Florian Ziel, 2018. "Probabilistic Forecasting in Day-Ahead Electricity Markets: Simulating Peak and Off-Peak Prices," Papers 1810.08418, arXiv.org, revised Dec 2019.
    20. Russo, Marianna & Kraft, Emil & Bertsch, Valentin & Keles, Dogan, 2022. "Short-term risk management of electricity retailers under rising shares of decentralized solar generation," Energy Economics, Elsevier, vol. 109(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:15:y:2022:i:17:p:6344-:d:902361. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.