A popular indicator of volatility in the spot market is the so-called daily spread, i.e. the difference between the highest and lowest price of the day. This indicator depends heavily on the price level itself and also on the development of the fundamental factors, in particular PV and wind generation and load. For the value of flexibility, it represents an easily tangible indicator: What would have been achieved with one MW of load or generation shift between the most expensive and cheapest hour on the spot market on one day? The same naturally also applies to injection and withdrawal from a storage tank.
Impact of the 2022 energy crisis on the daily spread
In the course of the 2022 energy crisis, not only electricity prices themselves but also the average daily spread reached record levels, which quickly becomes clear: High absolute price levels lead to high absolute price fluctuations. However, the progressive expansion of renewable energies and the decommissioning of thermal power plants are also changing the daily spread independently of the price level and therefore also the ratio of the daily spread to the price level.
Example April 2024: High fluctuation in electricity prices despite low price level
Despite a relatively low electricity price level, the past April 2024 showed a high degree of volatility, meaning that the monthly spread/price ratio in April 2024 was higher than at any time since April 2020 – when it was at a high level due to the coronavirus. There is also a general trend that the daily spread is higher in the summer months than in the winter months. This is due in particular to the fact that PV production reaches higher absolute levels in the summer months and therefore has a significant impact on the residual load and the daily price profiles.
Future prospects: Increasing price volatility and the value of flexibility
What does this mean for the future and the value of flexibility? The further expansion of renewable energies will inevitably increase the fluctuation in feed-in. Assuming insufficient storage capacities, this also has an impact on price fluctuations, regardless of the price level. In the medium term, high price volatility and therefore a high value of flexibility can therefore be expected to continue even if price levels fall. This increasing price volatility is reflected not only in the daily spreads of the Day-Ahead spot market shown here, but also in the 15-minute contracts, the volatility of the continuous Intraday market and the price levels of the markets in relation to each other.
Conclusion: Flexibility trading pays off
Flexibility marketing pays off, please contact us. This trend can be seen in the annual average of the spread/price ratio – especially if the years 2020 to 2021 are excluded due to the pandemic and the energy crisis.
