The market for the day ahead
Electricity is essentially a specific product, its peculiarity is that it can be sold to the end user only after its release. This feature affects the current market elements.
In Europe, markets operate by agreement. How to understand? First, the parties, namely the supplier and the consumer, fix the terms of cooperation in the contract, and the next day the energy supply begins according to the chosen model – intra-day and for a day ahead.
These markets are separate divisions where wholesale trade in energy resources is carried out. The day-ahead market model implies the sale of “goods” the next day after the end of trading. The intra-day model implies continuous operations of buying and selling energy resources at the end of trading and lasts only one calendar day.
The day-ahead market and its features
The functioning of such structures is possible only if there are united markets of European countries. All transactions are managed by the system’s operators. In 2008, the European Exchange was opened for this purpose. Currently, it is used by many countries for wholesale electricity trade. The creation of this enterprise has one single goal-the integration of European energy markets.
The day-ahead option on the domestic market allows you to create a variety of conditions for organizing regular trading. For its part, the operator guarantees compliance with the terms of contracts for the supply of energy resources and settlements for energy resources. As a rule, this trading model is chosen:
— system operator;
— end users.
Each of the listed participants signs an agreement on compliance with the terms of participation in the energy market.
How does trading work?
Operations with electricity are carried out at special auctions. For these purposes, the operator’s specialized software is used. Admission to trading is granted only to those companies that have entered into an agreement with the operator to conduct trading operations related to electric energy in this market structure.
The procedure for registering bidders, requirements for contract obligations, balancing principles, use of the market for additional options, mutual settlements and other provisions are spelled out in the trading rules.
If the company has chosen to trade a day ahead, then it must submit an application for participation a week in advance. At the end of the auction, the operator will study the results, organize the calculations and familiarize all participants with the information.
Contracts in such market structures are concluded in electronic form. These issues are handled directly by the operator, after which the documents become available for viewing and printing.
In the retail market, there are also certain rules that are responsible for regulating mutual cooperation between suppliers, consumers and operators of systems that monitor the distribution of “elements” of trade.
A necessary condition for maintaining the competitiveness of the electricity market and its efficiency is considered to be a liquidity indicator. In other words, conditions should be created under which there will be no special jumps in the cost of energy carriers, and additional expenses will arise.
In some cases, the operator fixes for suppliers certain monthly volumes of energy resources that need to be sold during this time. At the same time, the following condition must be met: the indicators should not exceed 15% of the total production for the month. This requirement applies to all producers, with the exception of small stations and organizations that use alternative sources of electricity. Thus, market liquidity is guaranteed.
Market regulation can also be carried out through setting standards for purchases. Such a decision is usually made to compensate for the technological costs of electric energy, this applies to its redistribution and transportation to electric networks. In addition, the operator can oblige energy producers to buy them on a specific market structure in order to eliminate possible technological losses. Such a market model will be effective only if a high-quality operator is created that ensures the proper operation of software development.
ENERGY LINE company has extensive experience in the energy market, today it cooperates with a large number of domestic enterprises. The company offers close and long-term cooperation on mutually beneficial terms.