EPEX SPOT market design changes: influence on the revenue potential of battery storage systems

Price volatility on the spot markets opens up promising business models for battery storage systems. At the same time, the spot markets are experiencing significant changes in market design. As part of the 14th International Energy Economics Conference (IEWT) at TU Wien, the implications of the current market design changes for the revenue potential of grid-connected battery storage systems were investigated. The work was honoured with the Young Scientist Best Paper Award.

Latest market design changes at EPEX SPOT

The European electricity system is changing fundamentally due to the expansion of renewable energies and the ongoing harmonisation of European electricity trading. The EPEX SPOT intraday auction for pricing intraday capacity was expanded across Europe on 13 June 2024. Instead of the existing country-specific intraday auctions, three standardised Europe-wide auctions have been in place since June 2024 as part of the Single Intraday Coupling (SIDC). [1]

In Germany, the original intraday auction (IDA1) at 15:00 on the previous day is now supplemented by a further auction (IDA2) at 22:00 on the previous day and a midday auction (IDA3) at 10:00 on the delivery day (see Figure 1). IDA3 only refers to the second half (12:00 to 00:00) of the delivery day. [1] In June 2025, the conversion of the SADC-linked day-ahead (DA) auction from the current hourly products to quarter-hourly products will be another significant market design change which will also align the DA market with the granularity of the intraday markets. [2]

How will the changes affect the revenue generation of battery storage systems?

According to various marketers, spot market shares in total revenue potential play a decisive role in cross-market optimization in 2024. In the future, the balancing markets are expected to become more saturated and thus the relevance of spot markets in BESS revenues is expected to further increase [4,5]. The market design modifications are expected to lead to changes in the revenue potential of the spot markets.

1. Additional markets for single-market-optimization and arbitrage

In principle, the new IDA2 and IDA3 auctions provide two additional markets that can potentially be used for single marketing and arbitrage. The analysis showed that the average absolute price difference between the markets increases with increasing time between their gate closure and increasing proximity to the time of delivery. This implies additional arbitrage opportunities from the new auctions, which take place with a longer time lag to the DA market. However, as can be seen in Figure 2, the new auctions are characterized by low market volumes and therefore increased price sensitivity towards the reduction or addition of capacity [6].

For the intraday auctions, the eFlame marketing model was used to model the revenue potential of a battery storage system in single-market-optimization and in two combined marketing scenarios. In single-market optimization, the new intraday auctions showed higher revenue potential than the DA market. In the combined marketing, cross-market-optimization on the DA and IDA1 auction was considered in comparison to additional marketing in the IDA2 auction. Optimization in three markets only led to slightly higher revenue potentials. Supply obligations due to participation in upstream markets in combination with cycle restrictions of the storage facility play a role in this. The difference between revenue potential and actual revenue is another significant factor. Particularly in markets with lower market volumes, the realization of revenue potential can be more challenging due to higher volatility and uncertainty, which is why combined marketing including the DA market with additional trading points can still offer advantages.

2. Increased day-ahead volatility due to improved representation of intra-hours extremes

The price level over the course of the day generally depends on the underlying merit order and the residual load (electricity demand after deducting variable solar and wind generation). The share of volatile and controllable generation in the system, the availability of renewable resources such as wind and solar, the change in consumption behaviour over the course of the day and the availability of flexibility options are decisive for intraday price development. Fundamental price fluctuations over the course of the day and the occurrence of price peaks are systemic in nature and can be utilized by BESS to generate revenue on all spot markets, regardless of the exact market design. [6,8]

However, higher product granularities can map changes in production and consumption more accurately [2]. Compared to quarter-hourly products, it can be assumed that extreme values that occur in quarter-hours are mitigated in the case of hourly products. This is due to the fact that changes in generation or load within an hour, which are already known at the gate closure time of the DA market, can only be modelled in hourly products via a single (medium) price. Accordingly, quarter-hourly products more accurately reflect extreme prices over the course of the day, which implies an increased price volatility of a quarter-hourly DA market compared to the original hourly product design and thus higher DA revenue potential for BESS.

Figure 3 shows historical hourly prices based on EPEX SPOT data and modelled quarter-hourly prices on the reference days 04.06.2024 and 05.06.2024

3. Disappearance of the sawtooth pattern on the intraday markets

In addition to the intraday optimization of BESS, price differences of the same time units between different markets can be utilized to generate revenue. Trading on the spot markets is determined by two opposing factors: While trades are generally concluded as early as possible to minimize risk and hedge prices, information on expected supply and demand improves with increasing proximity to physical delivery. On the downstream intraday markets, forecast errors compared to the upstream DA market are compensated for. Likewise, unplanned changes are equalized. This mechanism results in price differences compared to the DA price. [8]

In addition, there are currently price differences between the DA prices and the subsequent IDA1 auction due to the different product granularities of the markets. While products with a minimum time granularity of one hour are currently still traded on the DA market, quarter-hour products can be traded on the intraday markets. Accordingly, deviations in the expected price level for each quarter of an hour compared to the hourly value are also compensated for on the intraday market. The difference in the granularity of the markets results in the typical sawtooth pattern in the intraday auctions (see Fig. 4), which are used by BESS to generate revenue.

The formation of the sawtooth pattern is illustrated in Figure 5, which shows two hours with increasing residual load (left) and two hours with decreasing residual load (right). In the case of rising residual load, the hourly DA trade results in a load overestimation in the first two quarters of each hour and a load underestimation in the last two quarters of each hour. This increases demand during each hour and results in a price increase in the intraday auction. There is a price jump between the hours or between the last quarter hour of the previous hour and the first quarter hour of the subsequent hour, as there is a sudden change from load overestimation to load underestimation. Similarly, a reverse sawtooth pattern occurs as the residual load decreases. [8]

The additional price volatility caused by the formation of the sawtooth pattern propagates to the downstream markets and is used by BESS to generate revenue.

With the shift of the DA market to quarter-hour granularity, there is no longer a need to compensate for granularity differences on the IDA1 market compared to the upstream DA market. Market differences will then exist primarily in terms of proximity to the delivery time and market volume. Accordingly, it can be expected that the typical sawtooth pattern of the IDA1 market will not remain in its current form. Rather, it can be expected that the IDA1 price trend will follow the DA price trend more closely, similar to the way the IDA2 and IDA3 auction price trends currently follow the IDA1 price trend. This implies a decrease in the price volatility of the intraday auctions and price harmonization between the markets. Accordingly, lower revenue potential is to be expected in single-market-optimization in the intraday auctions and with regard to the utilization of price differences between the DA market and the intraday auctions in combined marketing. However, volatilities and price differences due to forecast deviations and differing price sensitivities of the markets are still to be expected.

Although the prices of the continuous intraday market are also fundamentally influenced by the price signal of the opening auction IDA1, and thus also by the sawtooth pattern, price fluctuations of the same time interval up to its delivery time are particularly significant for revenue generation on the continuous intraday market. However, the price development of a time interval up to its gate closure time depends in particular on unforeseeable changes in generation and consumption forecasts shortly before delivery as well as speculation by market participants [8,10]. Accordingly, significant BESS revenue potential on the continuous intraday market can be expected even after the introduction of quarter-hourly DA products.

Conclusion

Overall, the market design changes imply economic advantages in terms of DA revenues, as well as additional markets for individual marketing and arbitrage. At the same time, the disappearance of the typical sawtooth pattern due to the elimination of granularity differences leads to lower revenue potential on the intraday markets. The actual effects of market design changes are therefore largely dependent on the marketing strategy and can be partially compensated for by the possibility of combined marketing.

Want to know more? The FfE electricity price forecasts provide valuable information on the future revenue potential of battery storage systems. We have analysed suitable marketing strategies and their revenue potential in various projects and continue to monitor them in a changing market environment.

Literature

[1] EPEX SPOT, Intraday Auctions (IDAs) were implemented across Europe on 13 June 2024, EPEX SPOT News, 2024. Zugriff am 12. November 2024. Verfügbar unter: https://www.epexspot.com/en/news/intraday-auctions-idas-were-implemented-across-europe-13-june-2024.

[2] EPEX SPOT, New 15-minute products in Market Coupling, 2024. Zugriff am 13. Februar 2025. Verfügbar unter: https://www.epexspot.com/en/new-15-minute-products-market-coupling

[3] EPEX SPOT, Trading Brochure, Feb. 2025, 2025.Verfügbar unter: https://www.epexspot.com/sites/default/files/2025-02/EPEX%20SPOT%20Trading%20Brochure%202025%20February.pdf.

[4] Aurora Energy Research, Battery Profitability in Germany, The Netherlands, and Belgium, 2024. Verfügbar unter: https://www.auroraer.com/insight/battery-profitability-in-germany-the-netherlands-and-belgium/.

[5] J. Figgener, P. Stenzel, K.-P. Kairies, J. Linßen, D. Haberschusz, O. Wessels, M. Robinius, D. Stolten und D. U. Sauer, The Development of Stationary Battery Storage Systems in Germany – Status 2020, 2021. Journal of Energy Storage, Bd. 33, 2021, Art.-Nr. 101982. Verfügbar unter: https://doi.org/10.1016/j.est.2020.101982.

[6] S. M. Braun und C. Brunner, Price Sensitivity of Hourly Day-ahead and Quarter-hourly Intraday Auctions in Germany, 2018. Zeitschrift für Energiewirtschaft, vol. 42, pp. 257–270, 2018. Verfügbar unter: https://doi.org/10.1007/s12398-018-0228-0.

[7] EPEX SPOT, Market Data, 2025. Verfügbar unter: https://www.epexspot.com/en/market-data.

[8] T. Wawer, Spotmärkte für Elektrizität. In: Elektrizitätswirtschaft, Springer Gabler, Wiesbaden, 2022, S. 157 ff. Verfügbar unter: https://doi.org/10.1007/978-3-658-38418-0_6.

[9] ENTSO-E, Transparency Platform, Total Load – Day Ahead /Actual, 2025. Verfügbar unter: https://transparency.entsoe.eu/load-domain/r2/totalLoadR2/show

[10] J. Rominger, M. Losch, S. Steuer, K. Köper und H. Schmeck, Analysis of the German Continuous Intraday Market and the Revenue Potential for Flexibility Options. 16th International Conference on the European Energy Market (EEM), Ljubljana, Slovenia, 2019, S. 1–6. Verfügbar unter: https://doi.org/10.1109/EEM.2019.8916566.