VisoTech, a Viennese provider of software for automated energy trading, is now collaborating with Energy Weather from Krefeld. The result allows direct marketers of wind or solar power to trade more accurately. A guest contribution from the managing directors Jürgen Mayerhofer and Robin Girmes:
On the intraday power market, some significant deviations occur from the previous day’s forecasts, especially for wind power volumes. Particularly intense deviations occur in ramps, for example, during a cold front, hour-by-hour forecasts can be off by as much as 8 GW. The dominant position of the market-leading weather forecast has a major impact on plant and network management and thus the entire market.
Even before the day-ahead auction, the probable feed-in development of the next day’s intraday trading is obtained.
While many market participants follow this forecast literally, innovative trading companies and direct marketers are using alternative approaches to take advantage of this market inefficiency.
Comparison with similar historical weather patterns
Energy Weather has addressed this market-inhibiting issue over the last two years and has developed an alternative: the “Renewable Analogy Model” (RAM). It bypasses the market inefficiency descried above and makes it possible to take a position earlier by analysing similar weather conditions from the past. The result: Even before the day-ahead auction, the probable feed-in development of the next day’s intraday trading is obtained.
Weather-based trading can take place purely intraday or based on analogies from the day-ahead auction to the time of delivery. The most favorable risk-reward ratio results from a mixture of both approaches. It only very few days of loss, but earns an average of 45 cents profit per hour and MW. With 25 MW position size, it was possible to make a profit of 15,000 EUR in January and February.
From a single source: weather-based trading algorithms
The use of algorithms in the marketing pf renewables per se generates a competitive advantage due to the speed of execution of a trading strategy. But algorithmic trading alone is not enough if you want to compete with the best of the best in Europe. For this reason, VisoTech and Energy Weather have bundled their know-how to develop the fastest and most intelligent trading algorithms:
- The trading algorithm cycles the existing position against the latest weather models to determine either a further confidence gain or a conflict with the signal from the day-ahead analogies. In addition, forecast measures for feed-in management as well as current measured values of wind and PV systems are included in the trading strategy.
- Data transfer and technical infrastructure are optimised so that signal changes react in the range of milliseconds.
In this way, it is a well-rounded trading approach taking into account all price-relevant weather information – with the special feature of staying one step ahead of the majority opinion formed on the market.
Article written by Robin Girmes – Managing Director Energy Weather and Jürgen Mayerhofer – Managing Director VisoTech and published March 8, 2019, on ZfK. © 2019 ZfK Zeitung für kommunale Wirtschaft. VKU Verlag GmbH Munich/Berlin
You can read the original article (in German, subscription required) on Zfk.de.
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