Electricity Price Volatility: The Gateway to Opportunity?

Price volatility in the electricity markets is high on the energy agenda. How do we transform price volatility into an opportunity?

Higher than normal gas prices, low wind output, abnormal interconnector events and higher carbon prices have been the root cause of recent spikes. However, these types of events will become increasingly more commonplace due to the nature of an increasingly renewable-generation-based electricity grid.

It’s a theme that we know will recur, yet spikes are consistently communicated as a problem for bill payers that needs to be solved, rather than an opportunity to be harnessed.

How do we transform price volatility into an opportunity?

“Electricity Price volatility can be an opportunity for businesses if addressed properly, particularly for SME industrial and commercial sites where the impact of a price spike can be critical. There are ways that businesses can hedge against price spikes and  on top of that benefit from price volatility, all whilst helping the national grid cope with situations like these. Simply said, SMEs can have their cake and eat it too – if done the right way” explained Stephan Marty, CEO at Wattstor.

Wattstor is partnering with electricity suppliers [more news on this to come] to deliver a hybrid dynamic tariff offering to SME I&Cs. Essentially, these tariffs ensure that energy consumption is charged at a fixed rate, whilst on-site flexibility can still be sold to the grid at a significant profit – all fully automated.

Recent price spikes at a glance…

  • Prices on the day-ahead market for the 14th September peaked at £2,500 per MWh, against the £40 per MWh average baseload price during 2019-20.
  • Another extreme evening peak came after this on the 15th September at a staggering £1,860 per MWh.
  • The Balancing Mechanism hasn’t been immune from the spikes, as it saw a record high of £4,037.80 per MWh on 9th September.

The opportunity

Typically, an I&C site could easily achieve a 20% net-reduction in energy costs based upon non-extreme events, with the right energy strategy and Wattstor’s platform in place. However, on a hybrid dynamic tariff during the anomalies of the past week or so, Wattstor clients could make back almost double their entire daily energy spend in just a four-hour window.

James Belcher, Chief Product Officer at Wattstor, commented “Optimising against time of use pricing is nothing new. However, the kind of pricing peaks we are now seeing requires a more dynamic solution. Wattstor’s platform intelligently shifts load, manages generation and optimises storage whilst maintaining grid limitations and respecting operational parameters. Only a solution that can manage all these variables in real-time will enable customers to capture maximum value in today’s volatile wholesale market. On top of this, we have hybrid utility solutions that empower customers to protect themselves from risk and only capitalise on pricing peaks in the half hour periods that they chose to do so.”

Until Wattstor entered the market, this level of optimisation has been relatively inaccessible to smaller and medium sized businesses due to the typical costs associated with such sophisticated systems. Some of the well-known names in EMS, along with aggregators and traders, won’t go near businesses under a certain level of spend/consumption. This leaves these businesses less competitive and unable to participate in the transition to a greener, more flexible, more affordable energy network.

Why are these events happening?

Recent extreme events contributed to the electricity price hikes, one being a fire at the IFA1 French Interconnector. However, interconnector capacity prices are also peaking at particularly high levels as a consequence of Brexit trading arrangements.

Whilst this can be seen as a “freak” occurrence, we can expect to see greater price volatility in the markets as renewable energy sources become increasingly prevalent.

The bottom line

Extreme event or not, businesses need to make plans to hedge against price volatility in the markets due to increasing renewables.

Steep Solar PV cost reductions, equally impressive battery cost reductions, rapid uptake of EVs, increasing grid congestion issues and steadily increasing wholesale electricity price volatility, combined with political and societal pressure to reduce carbon emissions create the perfect opportunity for businesses to utilise a platform like Wattstor’s to mobilise their energy strategy for outstanding ROI.

The opportunity to create huge net-savings on electricity costs is vast, and with the right strategy, technology and expertise, the returns are compelling, with recent events delivering an ROI of 190%.

CEO Stephan Marty concluded, “Wattstor is committed to collaboratively working with solar & storage installers, EV charging point operators & installers, energy project developers, and local energy communities to deliver the technology and expertise required to bring SME I&C businesses into the fold. Not engaging this sector in such important market transformations would be a missed opportunity across the entirety of the energy landscape.”

Learn more

To learn more about Wattstor’s dynamic tariff offering visit our Wholesale Trading page or download Wattstor’s full brochure.

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