Day-ahead trading in the energy industry refers to the buying and selling of electricity for delivery the next day. It is a central component of the electricity market and is mainly conducted on exchanges such as the European Energy Exchange (EEX) in Leipzig. Here are some key points:

How it works

• Bidding: Market participants such as energy suppliers, traders and large consumers submit their bids for the purchase or sale of electricity. These bids include the quantity and price at which they are willing to buy or sell electricity.
• Market clearing: All bids are brought together in a so-called auction process. The intersection of supply and demand determines the so-called "market clearing price" for each hour of the following day.
• Timetable: The auction for the day-ahead market usually closes at 12:00 noon on the previous day and the results are announced shortly afterwards. The market participants then know how much electricity they have to supply or purchase and at what price.
  

Advantages of day-ahead trading

• Planning security: It offers market participants the opportunity to plan their production and consumption one day in advance.
• Price signals: The day-ahead price serves as an important reference for the spot market and also influences long-term price developments on the electricity market.
• Competition: The centralised auction platform creates a transparent and competitive market that enables market participants to trade at fair prices.

The challenges

• Volatility: Prices in day-ahead trading can fluctuate significantly as they depend on many factors such as weather conditions, power plant availability and demand forecasts.
• Integration of renewable energies: Fluctuations in the feed-in of renewable energies such as wind and solar pose a challenge as they are difficult to predict.

Connection with other markets

• Intraday market: The intraday market complements the day-ahead market by enabling short-term adjustments until shortly before actual delivery.
• Futures market: The futures market makes it possible to trade electricity for a longer period in advance, thus offering additional hedging opportunities.
  

Day-ahead trading is therefore a key element in balancing supply and demand in the electricity grid and contributes to the price formation and stability of the electricity market.