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The 1st of October 2021 saw an important change come into effect in the German power generation sector, with the introduction of a new congestion management system, labelled Redispatch 2.0. As the country undergoes a transition away from nuclear and coal-powered generation towards more renewable sources, new challenges have undoubtedly emerged in the area of managing transmission capacity levels on German grids. Given the fact that these new sources of energy are smaller, more intermittent, and more dispersed, new measures were needed to optimize grid stability in the country. The core changes effected by Redispatch 2.0 are new requirements surrounding data exchange between grid operators and market participants, the lowering of the threshold for units to be obligatorily available for redispatch from 10 MW to 100 kW, and new treatment of EinsMan (curtailed) volumes in terms of payment to producers.
It is this third core change listed in the previous section that will have the biggest impact on German direct marketing desks. In simple terms, the new redispatch regulations aim to create market conditions such that no curtailment had taken place, thereby removing any possible distortion in prices and in the market value of assets. Before October 2021, system operators (TSOs & DSOs) paid producers directly the feed-in tariff for their curtailed volumes, as if no curtailment had taken place. Now however, direct marketing desks will instead be responsible for remunerating energy producers for their curtailed volumes, and will sell the curtailed volumes on the spot exchange as if the energy was actually generated. Clearly for direct marketers, this may have an impact on how they price renewable assets.
As mentioned above, direct marketers will trade curtailed volumes on the spot exchange, and subsequently compensate producers as normal. Independent producers will therefore receive the market value of the volume of energy from their direct marketer, and the market premium amount from the TSo or DSO. With this change, some producers may be subject to changes in the management fees charged by their direct marketer, flowing from a revaluation of the asset by the direct marketer. Regarding the effect of Redispatch 2.0 on spot prices, some commentators have speculated that the changes may see larger volumes sold on spot markets on high-wind days, therefore days when market prices are expected to be lower than average. Therefore, hourly prices achieved in the market may be subsequently reduced by this boost in the supply curve. How this will play out in the long-term remains to be seen however.
We at Streem Energy are uniquely positioned to help our clients navigate these widespread changes. Direct marketing desks that are relying only on site-specific historical data for their pricing process are now faced with the challenge of assuming that volumes that were curtailed and withheld from the spot market in their historical data will now be traded on the exchange as if no curtailment had been effected. This may introduce an inherent bias into a lot of models, however Streem’s sophisticated pricing methodologies can adapt easily to changes like this, as our engine enables users to move past a reliance on simple historical generation data.
Contact me at eferry@streem.eu or on LinkedIn to chat more about your experience with Redispatch 2.0, and how you can take advantage of Streem’s unique pricing services.
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