There has been more to Brexit than congestion at Dover and delayed deliveries of fresh produce. EPEX Spot and Nordpool, UK market players active in the Day-Ahead Auctions, have been decoupled, meaning their prices are no longer the same. This decoupling of auctions and reduced liquidity has increased Day Ahead volatility and extended revenue opportunities for flexible assets including energy storage. Prior to Brexit, the only time Nordpool and EPEX Spot had decoupled in the U.K. was in June 2019 due to a technical error, this decoupling occurred in many countries across Europe as well.
Historically EPEX Spot and Nordpool markets were coupled by an algorithm called Euphemia, this optimises many of the EU’s electricity markets and interconnector flows at the day-ahead stage. Post-Brexit the U.K. is no longer part of this market coupling algorithm and the U.K. EPEX Spot and Nordpool auctions are run separately. This does not prevent Limejump and U.K. market participants from trading electricity in and out of Europe, however, it does reduce the efficiency of trading as the interconnector flows are no longer implied by the Day-Ahead power market.
Another result of this separation is that the two auctions in the UK now close at different times, creating inefficiencies within our internal market. Whilst this does not directly lead to higher electricity prices it complicates energy trading. This has led to greater price divergences between the UK’s now two markets, N2EX and EPEX, along with deviations from the main EU market. For example, on 13 January we observed a price difference of up to £500/MWh at auction clearing between Nordpool and EPEX Spot.
Volatility creates opportunities when trading flexible generation. At the beginning of the year, we saw high levels of stress on the system driven by cold weather and varying wind generation during high demand which has been accentuated by the inefficiencies caused by this decoupling.
These changes have created opportunities for our customer’s assets, which our 24/7 trading team have been seeking to continually optimise.
Reach out to Limejump’s Business Development Team if you wish to hear further details on the above.