Unlocking 30% additional revenue with Free Energy Bids through our VPP

CyberGrid offers a compelling opportunity to maximize revenues through free energy bids. Our customers can achieve up to 30% additional revenue by leveraging these bids, which provide additional flexibility to the Transmission System Operators (TSOs) for effective grid management. These bids can be activated by TSOs as needed, enabling rapid responses to market imbalances, which is vital for maintaining grid stability and efficiency. By participating in the balancing energy market, our customers contribute to the overall stability of the power grid while unlocking new revenue streams from their flexible assets.

CyberGrid's successful involvement in the Austrian market for balancing energy highlights the effectiveness of our solutions. Our innovative approach enables Balance Supplying Parties (BSPs) to offer additional flexibility that might not have been foreseen or accepted during the capacity auction. This ensures that even short-term flexibility can be efficiently traded, delivering both economic and operational benefits to our customers and the energy market.

EVN's intraday traders have successfully participated in the Austrian market for balancing energy for the first time, with their energy bids being submitted and accepted by APG. They have also successfully completed additional tests on product specifications and trading schedules. Notably, EVN is among the first participants in this market in Austria, underscoring the innovative approaches of both EVN and CyberGrid exploring new market opportunities.

We are pleased to present an exclusive interview with Dr. Christoph Gutschi, Senior Project Manager at CyberGrid. In this discussion, Dr. Gutschi shares valuable insights into the world of free energy bids and their role in maximizing revenues for our customers.

Interview on Free Energy Bids

Q: How would you define the term “Free Energy Bids”?

A: There are 2 markets for aFRR and mFRR ancillary services:

• the “old” capacity market clears on the day before and the BSP (balance supplying party) can offer capacity bids, in Austria for a period of 4h, e.g. 0-4, 4-8, ... 20-24;

• the “new” additional energy market clears only 25 min before start of delivery. The product duration is 15 min. Thus, there are 96 auctions per day. The energy market only pays for activated energy but not for capacity.

The BSP can offer additional flexibility, that has not been foreseen at the time of the capacity auction, or that has not been accepted in the capacity auction. These are called free bids. In the new energy auction, it is also possible to adapt the energy price of already accepted capacity bids.

Q: How do TSOs decide when to activate free energy bids?

A: Free energy bids are added to the merit order of the previously accepted capacity bids. The TSO activates the bids according to the energy price:

• positive activation: from lowest towards highest price;
• negative activation: from highest towards lowest price.

Q: What is the role of free bids in balancing the supply and demand of electricity?  

A: Free bids increase the liquidity of the national aFRR and mFRR energy markets and can enable service provision from reserves, where the securely available flexibility cannot be forecasted at the time of the capacity auction (on day before) but only in the short term (e.g. 30 min before delivery).

Q: Do free bids have an impact on the merit order?

A: As explained above, the free bids are added to the activation merit order, giving the TSO more options to avoid very expensive bids (which are located at the very end of the merit order).

Q: What are the main benefits of free energy bids?

A: The BSP can earn additional revenues with flexible assets, that can only be forecasted in the short-term. The BSP can still exploit flexibility assets, where the capacity bid has not been accepted.  

Q: When can someone trade free bids?

A: In principle, every BSP that is prequalified and manages prequalified assets and supports the trading API can participate in the free-bids market.

In practice, the high number of auctions (96 per day) require a fully automated Virtual Power Plant (VPP) and trading system.

Q: What does it mean that these free bids are “voluntary”?

A: In the Austrian market there is no obligation to participate in the energy market for aFRR and mFRR. The TSO automatically translates the accepted 4h-capacity bids into 16x15 min energy bids.

Q: Are free bids only traded as energy?

A: TRUE. Free bids are only traded as energy and receive activation remuneration instead of reservation remuneration.

Q: When can free bids be activated?

A: Free bids are activated only if they are cheaper than contracted market players.

Q: Can free bids influence market prices?

A: YES. Free bids can reduce market prices, thereby benefiting consumers.

Q: How do free bids leverage the need for flexibility and storage solutions to handle variability in renewable generation?

A: Since the gate closure time (GCT) of the energy auctions is only 25 min before start of the delivery period, the participation of fluctuating renewable energy sources (which cannot be forecasted precisely enough on the day before) is facilitated.

Q: Why should a market player voluntarily offer free energy bids?

A: Because free energy bids can increase market participation of a given portfolio of flexibility assets and raise the potential earnings of the portfolio on markets for aFRR and mFRR.  

Q: How can market players get an additional ca. 30% of revenues with free bids by using CyberNoc?

A: As mentioned above:

• flexibility assets that cannot be precisely forecasted at the time of the capacity auction can be traded on the energy markets (GCT only 25 min before start of delivery);

• flexibility offers, that have not been accepted in the capacity auction, can be traded again as free bids on the energy market and still realize a fraction (ca. 60% for aFRR) of the revenue potential of the balancing services;

• the second fact allows a more aggressive trading strategy on the capacity markets in order to increase the revenues from the capacity payments – if the capacity bid is too expensive and will be rejected, the asset can still be traded on the energy market, so it does not miss on 100% of the potential revenues but only on the capacity part of the potential revenues (which is only ca. 40% for aFRR markets).