New trading toolkit for a transforming energy market
Cheap, abundant and variable wind and solar is shaking up the electricity market, forcing traders to rethink how energy is bought and sold.
The Renewable Energy Hub, an offshoot of global carbon brokers Tradition, is taking up the challenge, creating new renewable-specific ways to trade energy.
In the newest episode of Rewired, founder Chris Halliwell joined us to discuss the Hub’s work, explaining that electricity is amongst the most volatile and unpredictable commodities in the world.
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“You’ve got a product that can be stockpiled on a wholesale basis, it’s subject to live supply and demand metrics, to weather, to human behaviour on literally a five minute basis”
Unlike coal plants that chug along at a predictable tempo, renewable generators ramp up and down, often with little notice.
To manage the variability, the Hub has developed purpose-built contracts that harness the strengths of renewable technologies, while minimising exposure to risks that come with the inherent variability of the weather.
One product they offer, a ‘super peak’ contract, gives buyers access to cheap daytime solar power, backed up by storage to hedge against the risk of price spikes in the morning and evening peaks.
Amongst their other products is a contract to help generators to smooth the variability of solar output during the day, with another to manage the price spread between the charging and discharging of energy storage.
“In the case of daytime solar, of course, we’ve had this vast proliferation of rooftop solar, you know, some 200 megawatts a month on average, for years now, it’s a such a significant supply side increase in the daytime, that it’s completely changed the distribution in half hourly intraday value of energy.”
The Hub consulted with energy buyers and sellers to develop their products, which are helping to make renewable energy a viable option for more energy users.
“A lot of our work and our products is around creating contracts that allow people to manage that price discrepancy, the price distortion within the daytime, across, you know, the high priced and low price periods of any given day period.”
Under the first deal signed, Snowy Hydro has provided 25 MW of on-demand hydro electricity to a large industrial customer to protect against price spikes at the beginning and end of the day.
ARENA funding is also supporting the Renewable Energy Hub to develop a new marketplace where participants can compare products, access market data and analytics and undertake transactions.
According to the Hub, the CORE Markets platform will help to stimulate new renewable energy projects, creating demand for generation and storage in a post-renewable energy target world landscape.