Energy Market Management

This has been a difficult winter for European electricity. The rise in wholesale prices has been sharp and widespread—it is not restricted to a few hours, or to one corner of the Continent, or to days when something unusual happens. The weighted average price across the EU exceeded 100 €/MWh in both November and December, returning to levels not seen since early 2023. January 2025 does not look much better so far. The primary driver of European electricity prices on a day-to-day basis is the volatility of wind. But wind exerts this influence because of broader shifts in the system. Nuclear remains far below its peak, and coal has declined sharply. Output from hydro is low, in some places acutely so. Solar delivers very little during the winter, and even less on cloudy and rainy days. In other words, the European system is short. It is very short when the wind does not blow, it is mostly short in the evening no matter what, and it is mildly short during other times (it is rare to see negative or zero prices outside a few key countries). We then use gas to close the gap, triggering a vicious cycle between tight gas markets and tight electricity markets. The result is high electricity prices during most hours and extreme prices during some hours. This is hardly a stable equilibrium. We talk a lot about flexibility—and rightly so. But flexibility is often defined in short intervals—a few hours or maybe a few days, leading us to emphasize solutions like storage or demand response. We rarely test scenarios based on the data in this chart, and we rarely model the interactions among systems that are making decisions quite independently from one another. Extreme prices are distress signals. They are telling us capacity is missing. And they are telling us that whatever governance system we are using to oversee this complex, EU-wide system is not enough. The path to lower prices lies not just with deploying more renewables and more storage, but also in solving this complex governance puzzle. It is the only way to guarantee resource adequacy without resorting to a steady stream of exorbitant prices.

⚡ Ten days. That’s all it took for Germany’s 15-minute market to expose our next big energy problem. When Germany switched from hourly to 15-minute spot market prices, it wasn’t just a technical change. It was like turning up the sensitivity dial on the entire energy system. Suddenly, the grid started telling us the truth… every 15 minutes. And it’s fascinating what that truth looks like. 1️⃣ Prices now move with the weather Every passing cloud, every burst of sunshine, you can see it reflected in the market. Prices spike, dip, recover, all within minutes. It’s messy, yes. But it’s also honest. 2️⃣ Flexibility has become the real star In a world that moves every 15 minutes, flexibility isn’t a nice-to-have. It’s everything. Batteries, smart EV charging, flexible industrial loads… These aren’t “future tech” anymore. They are what keep the grid balanced in real time. 3️⃣ Renewables are setting the rhythm Midday prices drop when solar floods the grid. Evenings see the classic ramp-up as the sun fades but demand stays high. The market is finally dancing to the rhythm of the sun and wind. 4️⃣ The Flexibility Gap is showing There are a few moments, very few (marked in golden circles), when renewables actually exceed demand. Those moments whisper: “We could have run on 100% renewables… if only we had more flexibility.” Storage, smart demand, and hydrogen can turn those whispers into everyday reality. 5️⃣ Efficiency is quietly improving More granular trading means fewer mismatches, less waste, and better alignment between generation and demand. The system is learning to breathe more naturally, in smaller, faster rhythms. 6️⃣ It’s not just about power anymore. It’s about timing. In a 15-minute market, the question isn’t “how much energy do we have?” It’s “when do we have it?” That’s a mindset shift for utilities, for industry, and for all of us watching this transition unfold. 💭 My takeaway Germany’s 15-minute market is teaching us that the energy transition doesn’t just need clean power. It needs quick reactions. We’ve built renewables. Now we need to build flexibility. Because in this new world… every 15 minutes counts. ⚡

"Demand can’t be managed nor made intelligent” I hear this all the time from "industry experts". But it's wrong. At Octopus, we've been able to consistently achieve 30-50% decrease in peak energy usage by managing thermostats. ERCOT's energy-only market highly rewards this type of customer flexibility. While competitors struggle with 50% override rates, we've been able to achieve 5-10% override rate. All of this is because we're not focused on demand response. Instead, we're focused on customers and learning about each individual one. And hence true customer-centric flexibility. Today's ERCOT forecast is for "just enough supply to satisfy demand". Yes, we should build more supply. And we're doing so rapidly in Texas. But there are also GW of flexible demand to unlock. We can avoid many, maybe all, of these grid challenges by rewarding customers for providing flexibility. We do this through our Intelligent Octopus product where Texans get ~25% off their energy rates for choosing the flex-based product. That's $600-800/yr back in Texans' pockets. Flexibility creates deflationary loops: lower costs, lower carbon, more resiliency. And consumer flexibility is the most untapped oppty.

In the wake of Europe’s worst blackout, Spain has adopted a temporary solution to address the energy security challenges during "hellbrise" at midday. These are periods with the highest solar and wind generation combined. Spain’s grid operator, Red Eléctrica (REE), has transitioned the national grid into a "strengthened mode" of operation. Essentially, this involves partially suspending normal electricity market operations by compensating renewable generators (solar and wind) to curtail output at peak times, making space for more synchronous generation from hydro, nuclear, and gas plants. These conventional plants provide essential stability services. Their large spinning turbines offer critical system inertia, absorbing shocks and smoothing power fluctuations, thus creating a robust buffer against disturbances. Furthermore, synchronous generators significantly enhance frequency regulation and voltage support, while also boosting system strength through short-circuit capacity and power system stabilizers (PSSs). Spain’s post-blackout strategy represents a clear departure from typical operations, emphasizing a conservative, reliability-focused approach. At a Senate hearing on May 6, Spain’s Energy Minister Sara Aagesen Muñoz stated, “The electrical system is now operating under reinforced conditions regarding operational security," explicitly referencing measures introduced after the April 28 incident. She also highlighted REE’s independent technical authority in taking necessary actions to "guarantee security of supply." In practice, wind and solar generation are now being modestly curtailed, depending on daily renewable forecasts, until the grid infrastructure and control systems can reliably accommodate higher instantaneous renewable penetration levels. The current "strengthened mode" is intended as a short-term emergency measure. Government and REE officials have clarified that this strategy will remain only until the precise causes of the blackout are fully understood and appropriate upgrades are implemented. Historically, Spain has been a pioneer in renewable energy integration, regularly setting records in wind and solar production, making this temporary shift especially notable. For now, however, maintaining grid stability and ensuring reliability clearly takes priority: more spinning turbines, less immediate reliance on solar and wind, until operators are confident the grid can handle operating at a smaller stability margin safely.

Stable electricity prices ⚡ when wind and solar dominate 🌬️☀️? Sure! All you need is storage 🔋 plus a little bit of demand elasticity 🏭. New paper in Energy Economics with co-authors Fabian Neumann and Iegor Riepin: https://lnkd.in/g22frR7S based on a preprint from Aug 2024. The standard narrative goes something like this: Without fuel costs, there is nothing to set prices. There will be long phases of zero prices, then scarcity prices too high to be politically acceptable. Price recovery will concentrate in a few hours, then vary wildly from year to year. Who knows how we'll dispatch long-term storage. We argue that these problems are an artefact of modelling with perfectly inelastic demand (common in the capacity expansion world). If short-term elasticity is implemented to reflect today's flexible demand (-5%), the interaction of demand and storage is enough to produce stable pricing. This flexibility comes today from industry; in the future we'll have even more from industry, electric vehicles and heat pumps, which will further help stabilise prices. NB: nobody is asking poorer folks to turn off their heating in winter. NB: pure demand shifting, like a virtual storage, is also not enough; we need a smooth non-singular demand curve. This behaviour is illustrated in a model for the extreme case with only wind, solar, batteries, and hydrogen-based storage, where a piecewise linear demand curve removes high price peaks and reduces the fraction of zero-price hours from 90% to around 30%. Prices are more stable from year to year, and stable under perturbations of capacity. Cost recovery of assets is no longer concentrated in a few hours. Fuels derived from green hydrogen take over the role of fossil fuels as the backup of final resort, steering prices via their marginal storage value. We show that with demand elasticity, the long-term capacity expansion model exactly reproduces the prices of the short-term operational model with the same capacities. We use insights from the long-term model to operate storage with limited foresight. We conclude that the energy-only market can still play a key role in coordinating dispatch and investment in the future given current price elasticity levels. If demand can be further flexibilised in future, this will only help to stabilise prices even more. Post is mirrored on my blog to share outside LinkedIn: https://lnkd.in/gPSsf7c2

As grid operators and planners deal with a wave of new large loads on a resource-constrained grid, we need fresh approaches beyond just expecting reduced electricity use under stress (e.g. via recent PJM flexible load forecast or via Texas SB 6). While strategic curtailment has become a popular talking point for connecting large loads more quickly and at lower cost, this overlooks a more flexible, grid-supportive strategy for large load operators. Especially for loads that cannot tolerate any load curtailment risk (like certain #datacenters), co-locating #battery #energy storage systems (BESS) in front of the load merits serious consideration. This shifts the paradigm from “reduce load at utility’s command” to “self-manage flexibility.” It’s BYOB – Bring Your Own Battery and put it in front of the load. Studies have shown that if a large load agrees to occasional grid-triggered curtailment, this unlocks more interconnection capacity within our current grid infrastructure. But a BYOB approach can unlock value without the compromise of curtailment, essentially allowing a load to meet grid flexibility obligations while staying online. Why do this? For data centers (DC’s), it’s about speed to market and enhanced reliability. The avoidance of network upgrade delays and costs, along with the value of reliability, in many cases will justify the BESS expense. The BYOB approach decouples flexibility from curtailment risk with #energystorage. Other benefits of BYOB include: -Increasing the feasible number of interconnection locations. -Controlling coincident peak costs, demand charges, and real-time price spikes. -Turning new large loads into #grid assets by improving load shape and adding the ability to provide ancillary services. No solution is perfect. Some of the challenges with the BYOB approach include: -The load developer bears the additional capital and operational cost of the BESS. -Added complexity: Integrating a BESS with the grid on one side and a microgrid on the other is more complex than simply operating a FTM or BTM BESS. -Increased need for load coordination with grid operators to maintain grid reliability. The last point – large loads needing to coordinate with grid operators - is coming regardless. A recent NERC white paper shows how fast-growing, high intensity loads (like #AI, crypto, etc.) bring new #electricty reliability risks when there is no coordination. The changing load of a real DC shown in the figure below is a good example. With more DC loads coming online, operators would be severely challenged by multiple >400 MW loads ramping up or down with no advanced notice. BYOB’s can manage this issue while also dealing with the high frequency load variations seen in the second figure. References in comments. 

Rising EU gas prices drive European power prices: Europe’s “merit order” ranks power plants by their marginal (variable) costs for producing a single MWh of #electricity. To economically optimize the available electricity supply, the cheapest power suppliers produce first (#solar, #wind and hydro with marginal production costs of close to zero), while the most expensive power plants (#gas or coal) produce the last MWh of electricity to clear the market (see upper chart). Thereby, the most expensive power plant (gas) sets the electricity price for all power plants involved, even for those with zero marginal production costs (solar, wind and hydro). This is called “uniform pricing” because all power plants receive the same price for their supplied electricity. This merit order principle explains why EU gas prices set electricity prices and why both prices are highly correlated in Europe. As EU gas prices (TTF) have hit EUR 58/MWh (highest level since Jan 2023), German wholesale electricity prices have also started to rise and have mostly stayed above EUR 100/MWh in 2025, which is still significantly below the 2022 peaks after the Ukraine war started (see lower chart). Which companies could benefit? RWE, which captures Europe’s rising electricity prices in two ways: first, about half of its generated solar, wind & hydro power (41 TWh) is sold in Europe at zero marginal costs and second, its flexible gas power generation (42 TWh in 2023) captures the price spikes, when gas plants have to step-in during the so-called “Dunkelflaute” (when the wind does not blow and the sun does not shine) #energy

Snippet: Australia’s Renewable Energy Challenge: Curtailment and Opportunity Australia is rapidly shifting to renewable energy, but curtailment - spilling wind and solar power due to grid limitations - remains a challenge. In his article [1], Daniel Mercer of ABC News examines this issue and its implications for our energy future Key Takeaways: 1. Grid Infrastructure and Curtailment: Australia’s renewable energy grid is expanding rapidly, but without sufficient infrastructure upgrades, a significant portion of this clean energy is being wasted. Investing in modernisation could reduce curtailment and unlock the full potential of renewables. 2. Coal Plants as a Barrier: Coal plants, due to their inflexible design, continue to limit renewable energy integration. As these plants retire, renewables will have more room to grow, though careful management is needed to ensure a stable transition. 3. Rooftop PV’s Role in Curtailment: While coal plants' minimum operational levels limit the grid's capacity for renewables, rooftop solar PV increases curtailment by reducing operational demand during peak generation. This growing impact underscores the need for better grid management and energy storage solutions. 4. Energy Storage as a Key Solution: Storage solutions like large-scale to EV's and household batteries are essential to shifting surplus renewable energy to periods of high demand. This will improve renewable efficiency and help balance energy supply. 5. Economic Opportunities for Consumers: Curtailment presents opportunities for consumers to save on energy costs by adjusting their usage. Flexible consumption models could support grid stability and maximise economic benefits. 6. Market Reform for Renewable Growth: Australia’s energy market needs to adapt to the variability of renewables. Strategic market reforms could stabilise pricing, support renewable integration, incentivise the adoption of storage technologies and flexible loads. 7. System Design Challenges in Decarbonisation: Curtailment reveals the need for smarter grid management as Australia moves towards decarbonisation. Addressing these system design challenges could accelerate the country’s transition to a low-carbon future. 8. Aligning Climate Goals with Energy Efficiency: Reducing renewable energy waste through curtailment aligns directly with Australia’s long-term climate goals. Prioritising storage and grid improvements will strengthen the country’s sustainability efforts.    Curtailment poses challenges but also opportunities for Australia’s renewable sector. With investment in infrastructure, storage, market reforms, and flexible loads, the nation can better harness its renewable potential and meet its climate goals. References: 1. Australia 'wasting' record amounts of renewable energy as share of wind and solar soars by Daniel Mercer (Sat 06 Sep 2024) .. https://lnkd.in/g8-DmV-X

I was honored to join Axios energy reporter Ben Geman at the Atlantic Council in Washington, DC, for a fireside chat to discuss what it will take to power an economy that’s more electrified, resilient and competitive. The reality is stark: demand for electricity is projected to grow far faster than overall energy use. This is no threat to prosperity; it’s an opportunity - if we act with realism and speed. I have three takeaways from our discussion, and they are based on one simple insight: a successful energy transition needs energy security. We need to put the technologies and infrastructure in place to ensure we have the right energy, at the right time, at the right price. We can achieve this if we: 1. Squeeze more from every kilowatt: Energy efficiency and grid modernization are just as important as energy supply. We can quickly improve energy efficiency in industries and buildings by using high-efficiency motors with variable-speed drives. If widely adopted, this could reduce electricity demand by about 10% - the same as the output from around 100 coal plants or 35 nuclear plants. These savings could meet the growing energy needs of data centers for several years. 2. Modernize and digitalize the grid: We are still trying to run a 21st century economy on 20th century infrastructure. By 2040, the world needs 80 million kilometers (almost 50 million miles) of grid upgrades, plus storage and digital control, to integrate variable renewables, balance peaks, and improve resilience. Permitting is now a critical bottleneck. This is where targeted policy – with smarter approvals, clear standards, and investment in distribution networks – can unlock real capacity quickly. 3. Make AI part of the solution: There are a lot of headlines that Artificial Intelligence is driving up demand for energy. However, AI-enabled energy management – with digital substations and edge control – can also optimize usage, reduce losses and prevent outages. We have to see AI as a crucial tool to manage grids, to forecast, shift and reduce demand. AI can help us align demand growth with grid reliability. None of this scales without people. Resilient energy systems need a skilled workforce, from electricians to data scientists. Upskilling, retraining, and apprenticeships have to be made a priority by both the public and the private sector. The path forward is clear: electrify everything you can; deploy efficiency first; digitalize the grid; and use AI to manage what we add (and have). For regions and countries that do this, energy security will be a competitive advantage creating the foundations for sustainable growth. Listen to the full discussion here: https://lnkd.in/emMu-4zr

India’s Renewable Boom Is Impressive — But Unplanned Growth + Weak DISCOMs Could Trigger a New NPA Crisis India has achieved a major milestone: ·      50% of our installed capacity is now renewable ·      40 GW of new RE is planned this year But as CEA has cautioned, renewable capacity is now growing much faster than: ·      grid readiness ·      transmission capacity ·      demand growth ·      storage deployment ·      DISCOM capability ·      system flexibility This mismatch is creating hidden structural risks. Let’s be clear: adding RE “left and right” without system studies will create chaos. If solar/wind keeps growing ahead of: ·      demand ·      evacuation ·      variability management ·      storage ·      financial risk modelling We will see: ·      Rising curtailment ·      Stranded RE assets ·      Higher PoC charges ·      Stressed system operators ·      Delays in PPAs ·      Mounting DSM penalties And the biggest concern: A future wave of NPAs — this time from renewable energy. Just like the 2010–2015 thermal cycle caused NPAs due to unplanned additions, RE assets could face the same fate if risks stay unpriced and ultra-low tariffs continue. One critical missing link: DISCOM Reform. Without strong, digitalised, financially stable DISCOMs: demand cannot shift to RE-rich hours intuitive tariff-based DSM cannot be implemented peak shaving/load shifting remain impossible RE will get curtailed even when the grid has surplus green power India needs real-time, demand-linked planning. What should happen now: ·      Six-month rolling transmission plans ·      RE growth linked to demand & PPAs ·      Hybrid + storage as the default model ·      Flexible thermal for balancing ·      A national RE curtailment code ·      Tariffs that reflect real system costs ·      DISCOM reform + intuitive, dynamic DSM India’s energy ambition is bold and necessary — but ambition without integration discipline can create financial and operational fragility. With smart, synchronised, risk-aware, demand-linked planning, India can build not just the largest RE system — but the most reliable and financially resilient clean-energy grid in the world. Pl read the article attached and comment