Ascend Analytics reposted this
Last week in CAISO, higher than actual day-ahead net load pushed day-ahead prices higher than real-time prices, with spreads up to $100/MWh, on every day except the 7th. Virtual trading (also called DART trading or convergence bidding), which involves selling energy at the day-ahead price and buying it back at the real-time price, was a great way to capitalize on this dynamic without depleting SOC, although it does expose operators to downside risk in the form of a real-time price spike. What can operators learn from CAISO’s events last week? - Be wary of real-time price spikes when the net load forecast is high as this increases expected volatility in the real-time market and can spoil a short trade. - One alternative strategy is to buy real-time energy at low midday prices and sell in the day-ahead market during evening hours. Operators can then capture the spread between low midday energy prices in the real-time market and high evening prices in the day-ahead market with their only exposure to a real-time price spike being opportunity cost. Interested in learning more about how Ascend can help you with your Bid Optimization, go to Ascend’s website at https://bit.ly/4aKfRu0 and click “Talk to an Expert” to book a meeting.
Thanks for the insights, Mike - so much to consider in the CAISO and ERCOT markets in light of the extreme weather from the recent California heat wave and the Texas hurricane.
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2wGreat insights, Michael Huisenga! The dynamics within CAISO last week highlight the importance of strategic trading in energy markets. The volatility between day-ahead and real-time prices offers both opportunities and risks, as demonstrated by the significant spreads observed. Virtual trading presents a smart way to leverage these fluctuations, though it requires careful monitoring of real-time price spikes. Your alternative strategy of buying low midday prices and selling during high evening prices in the day-ahead market is particularly intriguing. How do you think operators can best prepare to manage the risks associated with these strategies in such a volatile market? This could lead to a deeper understanding of effective risk management in energy trading.