The electricity market is experiencing a phase of significant volatility, which has changed noticeably in recent years. While there were hardly any remarkable price fluctuations in 2020, the situation has drastically changed by 2024. This is impressively illustrated by the heatmaps of the prices for the mentioned years (see exhibit 2).
Exhibit 1: Heatmap Day Ahead Power Prices in Germany
Within a single day, the price spreads fluctuate significantly, presenting both challenges and opportunities for market participants. In the past week, negative prices were recorded on five out of seven days in the afternoon, while price peaks typically occur in the evening (see exhibit 2). A notable example is Saturday, August 24, 2024, when the lowest price was ‑44 EUR/MWh, while the highest value on the same day reached 106 EUR/MWh.
Exhibit 2: Net power generation and wholesale power prices in Germany, Calendar week 34, 2024
These price fluctuations offer significant earning opportunities, particularly for operators of large battery storage systems. Such a storage system could have earned up to 150 EUR/MWh on this day by exploiting the price differences. Additional trading between the price peaks and troughs could further increase profitability.
Currently, a large battery storage system proves to be an excellent tool for generating significant income in wholesale. The ability to store electricity and sell it when needed allows operators to optimally benefit from price fluctuations.
The causes of the high volatility are diverse. In addition to fluctuating renewable energy generation and geopolitical events, input costs have also changed. Furthermore, the power plant portfolio in Germany has evolved. The energy mix has changed due to the expansion of renewable energies and the gradual shutdown of conventional power plants, such as coal and nuclear power plants (see exhibit 3). These adjustments in the power plant landscape contribute to increased price volatility and accordingly influence market conditions. The further scaling of renewable power generation and the increasing electrification of the mobility and the building sector will further add volatility. The German government targets for example to more than double installed PV capacity from currently 90 GW to 215 GW in 2030. In the mobility sector the target is even a 10x increase from today 1.5 to 15 million e‑vehicles in 2030.
Exhibit 3: Net power generation in Germany
Overall, it becomes clear that the current market situation does not only represent a risk but also an opportunity for innovative storage solutions. Market participants who can flexibly respond to price fluctuations can benefit from the current developments.
