How to profit from energy price volatility

587-fold increase in extreme prices

5 September 2024, 12:18 pm | Kathrin Veigel

Volatility is a plus: GridX's new time-of-use tariff report identifies great potential for households in the fluctuations on the electricity markets – in Germany and across Europe.

In its current Time-of-Use report, GridX examines fluctuations in the electricity markets in Europe, including negative prices, and uncovers developments that are partly cheap but have great potential, such as significant cost savings.

The results of the report show that the average daily standard deviation of day-ahead electricity prices in 2023 will be three times higher than in 2020. These trends only underline once again the need to further integrate demand-side flexibility in European electricity markets and to further encourage the widespread use of time-of-use (ToU) tariffs, including time-variable tariffs, among consumers.

With the six country profiles, GridX also examines the country-specific conditions of various markets in the report, including Germany, puts them in context and highlights strengths and weaknesses in order to answer the question of how households can become the biggest beneficiaries of the sometimes extreme electricity price fluctuations.

Germany: Increasing energy price volatility opens up potential

In Germany, price fluctuations and negative electricity prices have increased significantly in recent years. Between 2019 and 2023, the number of hours with electricity prices above 100 euros per megawatt hour (MWh) rose from seven to 4,106 – a 587-fold increase. The average daily price range, i.e. the difference between the highest and lowest price, has also more than tripled from 30 to 98 euros/MWh.

According to GridX, the main driver of this is the growing use of renewable energies, especially solar energy, in the German electricity mix, the availability of which naturally fluctuates due to weather conditions. Solar energy in particular often leads to negative prices at midday when the sun's rays are at their strongest.

Last but not least, this development underlines the need for flexible energy consumption strategies and intelligent technologies. The company emphasizes that a modern home energy management system (HEMS) is crucial for shifting energy consumption to times of low or negative prices and thus unlocking significant savings potential for end consumers. An energy management system (EMS) that takes variable tariffs and fluctuating stock market prices into account can make a decisive difference here.

Germany must use flexibility from decentralized energy resources

According to a study conducted by Neon, the connected load of electric cars, heat pumps and home battery storage in Germany will increase from 20 gigawatts (GW) now to 200 GW by 2030. While these decentralized energy resources only offered 25 percent of total flexibility in 2020, they are expected to provide almost three times as much flexibility by 2030 and more than six times as much flexibility by 2045.

This results in enormous cost-saving opportunities for private individuals – provided that the right approach is chosen: GridX has simulated the savings potential of households with various energy setups and found that a household with its own photovoltaic system (9.5 kilowatt peak), a battery storage system (9.3 kWh), an electric car with 60 kWh and a household consumption of around 4,400 kWh could currently save around 500 euros (50 percent) per year thanks to time-of-use optimization, compared to the costs of a household without a battery and without a smart EMS.

However, according to the GridX report, it is important that an advanced EMS is used in addition, because this is the only way to ensure that your own solar energy can always be used optimally, your own solar power can be maximized and costs can actually be reduced to the maximum.

Smart energy management turns price volatility into savings

Although time-of-use tariffs offer significant benefits for households, consumer adoption is still slow, according to the report. This is particularly true given the potential for behavioral changes and disruption to daily routines. However, the GridX report highlights that automated processes, energy sector partnerships, and user-friendly solutions can help consumers experience greater convenience without sacrificing comfort.

This is also an important factor, because with the increasing number of decentralized energy systems in a household, smart control by an EMS is essential: An EMS efficiently links systems from different manufacturers and protocols to ensure optimal energy use. For example, solar power can be stored directly to supply heat pumps, to charge electric cars or for later use. The EMS thus maximizes the self-sufficiency of a household, reduces grid consumption and lowers energy costs.

Another advantage: In phases in which grid connection is necessary – for example in winter or in bad weather – the EMS shifts flexible loads to times when electricity prices are lower. However, caution is advised when choosing the EMS: today not all energy management systems are able to take ToU tariffs into account.