Why be interested in the spot market when you don't trade?

The spot power markets have developed considerably in recent years. In 10 years, the volumes traded on EpexSpot exchange have more than doubled, increasing on average from 6,000 to 14,000 MW per hour in France. This is why we believe that the spot markets are a mine of information that it would be a pity to miss, whether you are a trader, a buyer or simply curious to follow the evolution of our European energy systems:

• The spot markets do not lie, they reflect a real situation

Indeed, on the spot market, the psychological impact of the players is almost nil: electricity is not stored, nobody can hope to store it for speculative purposes. In real time, each player must maintain a perfect balance between his production and consumption, otherwise he will be penalised. Spot prices can therefore be seen as a reflection, as accurate as possible, of the supply/demand balance at a given moment.

• Spot prices are scouts, giving early warning signs of what is going to happen on the futures market

Cold spells, low plant availability, excess of renewables… the spot markets are the first to reflect changes in the supply-demand balance, which can herald significant changes in the futures markets. To take an example, low spot prices despite high consumption due to low temperatures will reassure the markets, which should have the effect of reducing the risk premium of futures products. Another very concrete case of use: monitoring and understanding the situation of the spot markets allows you to optimise the placement of your call for tenders, to avoid buying at an ill-timed period.

• Spot prices are witnessing profound changes in our energy policies

Spot prices are the best way to follow the evolution of energy policies in the long term.

By comparing the hourly form of the Day-Ahead price in August 2005 with that of August 2020, for example, we can see the very strong impact of photovoltaic production: the price peak corresponding to the morning consumption peak has disappeared, erased by solar production. Monitoring peak consumption, and the thermosensitivity of demand, can give indications on the performance of energy efficiency policies.

There has also been an increase in the number of negative price episodes, indicating an excess of renewable production in the face of a lack of flexibility in the conventional generation fleet. Indeed, some actors prefer to pay to produce for a few hours rather than shutting down their plants completely for too long a period of time.

And this is perhaps the most important lesson of the spot market: the management of the excess is at least as complex as the management of the deficit.