Over the past 10 years in energy, I’ve seen markets, technologies and trading rules change faster than ever. These shifts bring both challenges and opportunities for unlocking new revenue streams in negative price markets. As the energy transition accelerates, I want to walk you through how combining day-ahead curtailment and providing aFRR, can help boost revenue while managing market price risks.
The subsidy landscape is shifting fast. With SDE+ cutting subsidies after six hours of negative prices and SDE++ eliminating them entirely during negative intervals, energy traders and independent power producers need fresh strategies. Since the integration with PICASSO, overall price volatility has decreased and extreme imbalance prices occur less frequently. In combination with the higher number of Regulation State 2 PTUs, this has resulted in a lower overall imbalance price, changing both the risk profile and the value capture dynamics for energy traders.
At the same time, both market volatility and average prices across wholesale and balancing markets have been changing quite rapidly in recent years. Hence, it’s important to be able to remain agile and to combine multiple market strategies, enabling assets to access and deliver all the relevant energy and balancing services in order to “follow the money”.
What I’ve seen change:
We have to look at other ways to maximize value. One approach is “value stacking”, where you generate revenue across multiple markets, such as FCR, aFRR, wholesale, imbalance and congestion markets. By stacking these revenue streams, you stay flexible and maximize profitability.
Let me show a simplified example of how that can look like:
Scenario 1. No Curtailment
Solar panels produce despite negative price hours, resulting in a negative price impact.
Scenario 2. Day-Ahead Curtailment
Solar panels are being curtailed because of negative prices. No negative price impact, but there is more value to unlock.
Scenario 3. Day-Ahead Curtailment with aFRR
Solar panels are being decurtailed to deliver aFRR. Instead of bidding in during hours with negative prices, you hold back and bid aFRR up to generate revenue.
As the examples show, value stacking is a powerful solution to stay flexible and maximize profitability. In order to maximize profitability aFRR can help boost revenue while managing market price risks. STELLAR, our end-to-end Virtual Power Plant (VPP) platform, provides all the required connections to the TSO’s IT systems, acting as the operating system which empowers Balancing Service Providers (BSPs) to deliver balancing reserves, including aFRR. In the Netherlands, TenneT (TSO) sends activation signals via their Load Frequency Control (LFC) system in order to dispatch aFRR capacity up or down. STELLAR receives the real-time activation signal from TenneT and our advanced aFRR pool controller distributes the command across a VPP consisting of a pool of energy assets, such as renewable energy and battery systems. STELLAR enables operators to configure the merit order and behavior of the aFRR pool controller, ensuring that assets are dispatched according to optimal commercial conditions and trading strategies. By leveraging the capabilities of STELLAR, energy traders can maximize the value of renewable energy while mitigating risks from negative prices and increasing Regulation State 2 occurrences.
To actually be able to stack energy services in-line with the examples given, advanced EMS and VPP technology is a must. Furthermore, both stacking of energy services and pooling of different types of assets add greater complexity, though these advanced capabilities are key for unlocking greater flexibility from the asset portfolio. And through partnering with companies like Spectral, a large part of the technical and operational complexity relating to running VPPs, such as integration of asset SCADA systems and TSO platforms, can be taken off the plate of BSPs and energy traders, allowing them to fully focus on their core business.
Want to know how we can unlock new revenue streams for you? Get in touch today.
