Introduction – The terms “spot market” or “spot prices” refer to trading in which the price of a commodity changes dynamically and the buyer can decide at what point (at what price) to buy or sell it. Typical examples include stock markets and cryptocurrencies. However, electricity and natural gas are traded in the same way, and spot energy prices can also be described as wholesale (VOC), since direct trading on this market has been and remains inaccessible to ordinary consumers. Prices here fluctuate throughout the day depending on supply and demand. In a functioning economy, energy production and consumption are largely predictable; moreover, wholesale prices have been highly stable in recent decades. This allowed distribution companies to offer consumers fixed prices that remained profitable despite fluctuating VOCs.
Starting in 2021, however, the situation began to change dramatically, particularly in Europe. The EU’s policy initiative known as the “Green Deal,” compounded by the economic downturn caused by the COVID-19 pandemic and exacerbated by the war in Ukraine, led to uncontrolled price increases and the complete destabilization of the energy market.
This situation initially led to the collapse of smaller distribution companies, which operated on lower margins and, due to fixed pricing, were unable to pass on the sharp rise in wholesale prices to their customers. Large distribution companies, which have significantly greater financial reserves and may even be subsidized by the state, were better able to cope with this situation and maintained their contracted prices until the end of the fixed-price period. However, the new prices were, are, or will be a multiple of the original prices, and unfortunately, this situation will certainly not improve in the near future.
Spot Prices for Households?
Small consumers—whether businesses or households—generally cannot purchase energy directly on the spot market. They must always use the services of a supplier who is registered and holds the necessary license to broker energy sales. In the past, small consumers were not offered the option to purchase at spot prices, and given the stability of prices, there was no reason to do so. However, the energy crisis has changed this situation, and new companies have emerged that offer to facilitate purchases at wholesale prices even to small consumers, including households.
Households can now also take advantage of spot prices, with the only requirement being that the consumption point be equipped with a four-quadrant (4Q) electricity meter. This type of meter allows for the independent measurement of both energy consumption and supply at hourly intervals. Homes with an installed photovoltaic system are typically equipped with this type of electricity meter. The customer requests a change of supplier in exactly the same way as if they were switching, for example, from INNOGY to ČEZ or EON. They select a supplier that offers a spot rate, request the change, and that’s it. Electricity consumption is metered by the supplier to enable billing at hourly rates.
Experience from other parts of Europe confirms that this is a trend the energy market will continue to follow, and even traditional distribution companies such as ČEZ a.s. are now including similar rates in their offerings. However, it is important to read the terms and conditions of these rates carefully, as not all of them offer spot trading, even if their name includes the term “Spot.” So what is the advantage of purchasing at spot prices?
Fixed vs. Spot Electricity Prices
Fixed prices provide customers with a certain degree of certainty regarding the price they will pay for electricity in the coming period. However, the distributor must set the fixed price in such a way that it can purchase electricity for the customer throughout the entire term of the contract; and because prices are currently very volatile and are expected to rise further, fixed prices are marked up by a risk margin. The customer must therefore pay extra for this “certainty.”
The second option is to enter into a contract with a supplier for electricity at spot prices. In practice, this means that the distributor tracks how much electricity the customer consumed each hour and bills the customer at the price at which electricity was sold on the wholesale market at that time. The supplier then charges a commission for this service. This may take the form of a fixed flat fee (e.g., bezDodavatele, a.s. currently charges 6 Kč/day) or a surcharge on the price of electricity (e.g., ČEZ, a.s. currently charges 0.40 Kč per kWh supplied). As for electricity prices, the distributor bears no risk in this case, because it sells the electricity at the same price at which it purchased it. That is why, for example, fixed prices are practically never offered to businesses at this time. Their consumption tends to be significantly higher than that of households, and a fixed price would have to be extremely high to cover the risks of further increases in energy prices.
Active Trading on the Spot Market
Based on the information available so far, spot-priced supplies do not offer a significant advantage to consumers. When the wholesale price falls, they pay less; when it rises, they pay more. However, if a customer can adjust their consumption to match hourly price fluctuations, spot purchasing becomes a great opportunity—especially if they can not only draw electricity from the grid in a controlled manner but also feed it back into the grid. With a spot tariff, when they feed electricity back into the grid, they receive the same price for it as the current wholesale price—which is why it’s ideal to feed it back when the price is at its highest (see the chapter “The FENIX Energy Concept”).
Here, we’ll take a moment to discuss wholesale electricity prices. These prices are not determined entirely at random or unpredictably. On the contrary, they result from balancing hourly supply and demand in the market, and their hourly levels are determined by the most expensive energy sources used to balance the grid. On one side are the retailers, who have their own customers, know their consumption patterns, and can, to a certain extent, estimate how much electricity their customers will need the following day at a given time. They submit this demand to the state-established Energy Market Operator (www.ote-cr.cz).
On the other hand, there are power plants. They, too, are familiar with the typical pattern of electricity consumption, and since a conventional power plant cannot be started up in a matter of minutes, they plan their electricity generation in advance based on expected demand and send the operator an offer specifying how much energy they are able and willing to supply to the grid, when, and at what price. The Energy Market Operator (OTE) matches these bids and offers and, by approximately 2:00 p.m., publishes the wholesale energy prices valid from midnight for the next 24 hours on the day-ahead market.
Wholesale hourly prices are therefore available in advance and publicly accessible not only to traders but also to consumers. For consumers, however, this information is not particularly valuable on its own. Even though the trend (curve) of hourly prices is similar from one day to the next, prices do vary significantly from hour to hour. Therefore, any long-term scheduling of consumption will not correspond to the actual price trends, and it is not realistic to schedule consumption every day based on the available price list. However, if a consumer has a device capable of automatically retrieving the wholesale price list from the internet and is equipped with appropriate storage, the entire system takes on a completely different dimension. And it is precisely on this principle that the FENIX Energy Concept is based, with HES battery storage systems at its core.
The HES battery station is currently a completely unique device developed by AERS (a member of the FENIX Group). Measuring 0.6 × 0.6 × 1.9 m, it contains not only a 10-kW three-phase asymmetric inverter, MPPT control for a residential PV system of up to 12 kWp, and a control unit, but also a battery storage system with a capacity of up to 41 kWh. Given the station’s size, this is truly exceptional. The “All-In-One” concept itself is nothing new; what makes these stations unique is primarily the software developed specifically for them and the fact that, unlike most other stations on the market, they do not use commercial components such as inverters, MPPT controllers, or chargers—instead, everything is developed in-house. This allows for far greater flexibility in this solution.
A pilot application of the FENIX concept is a single-family home in Omice, which is equipped with an HES station. Every day, the control system not only retrieves wholesale energy prices but also uses weather forecasts for the region to predict how much electricity the connected photovoltaic power plant will generate the following day, while also taking the home’s consumption into account. Information regarding PV system generation is updated continuously, so generation forecasts are constantly refined throughout the day. Based on this input and the algorithms it uses, the control system decides when to charge the station (during periods of the lowest wholesale prices), how much the storage system should be charged, and how much capacity to reserve for the PV system (based on PV generation forecasts), when to limit power consumption from the grid for the home’s normal operation and supplement it from the battery, and when, conversely, to sell as much of the accumulated energy from the battery back to the grid as possible (during peak wholesale prices). The operational parameters of this single-family home are then evaluated by an independent authority—the University Center for Energy-Efficient Buildings (UCEEB) at the Czech Technical University in Prague is collaborating on the project.
As demonstrated by the pilot project in Omice, active trading on the spot market is not only accessible to households but also leads to significant financial savings. The concept is, of course, also applicable to the business sector, for which it is even more attractive due to the possibility of claiming a VAT credit. When selling electricity back to the grid, only prices excluding VAT are charged; however, the purchase of electricity is always subject to VAT, which businesses—unlike households—can deduct. Detailed information about the RD project in Omice can be found on our website, including regularly updated operational results. HES energy stations and participation in spot trading thus also represent an investment opportunity for households, protecting their savings from rising inflation.
