The electricity price we see on the market is not yet the final price at which we will actually buy or sell electricity. The outcome depends on the accuracy of production and consumption planning, contract terms, managing daily consumption and production profiles, and the ability to respond to changes throughout the day. In the energy sector, the gap between plan and reality can very quickly translate into additional costs.
When people talk about the price of electricity, most imagine a simple scenario. They look at a daily market chart, see the morning and evening price peaks and the midday drop in prices, and draw a fairly logical conclusion: generate power during peak hours and consume it when electricity is cheap. At first glance, this makes perfect sense. But this is precisely where one of the most common misconceptions in today’s energy sector arises. The fact that a certain electricity price exists on the market does not mean that a specific operation will actually reach that price. The reality of the energy sector is more complex. The price of electricity isn’t just a number on a price chart, but the result of the interplay between the plant’s schedule, the electricity traded on the market, and the ability to actually stick to what was planned. And that’s often where the economics of the entire operation break down.
Every inaccuracy turns into a deviation
The energy sector operates on a very simple principle: electricity must be generated at the exact moment it is consumed. Therefore, at every moment, there must be a balanced equilibrium between generation and consumption across the entire power grid. In the Czech Republic, this balance is continuously monitored and evaluated by ČEPS. The system incorporates the plans of both electricity producers and consumers—that is, information on how much energy will be supplied to the grid during specific time intervals and how much will be drawn from it.
Today, this balance is evaluated on a 15-minute basis, which means that each day is divided into 96 separate intervals. In each of these intervals, the production and consumption plan should correspond as closely as possible to reality. However, if actual operations deviate from these plans and the balance is no longer maintained, ČEPS must intervene using so-called balancing energy—that is, by calling on ancillary services from readily available electricity sources to stabilize the grid. And it is precisely at this moment that a concept arises that is fundamental to the economics of operations: the imbalance.
An imbalance refers to the difference between what was reported to the market as a production or consumption plan and what was actually produced or consumed. In other words, it is the difference between the planned and actual energy balance at a given facility. If the imbalance worsens the current system balance, it results in a cost for the facility, which can be very high in some situations.
It is true that there are often cases where a market participant’s deviation can, paradoxically, even yield a profit—this happens in situations where a deviation from the original plan actually helps balance the system. But relying on this is like playing Russian roulette. If you play it, you must be prepared for the possibility of an accident. The basic rule of energy trading is therefore: anything that is not agreed upon in advance and included in the planned balance is a deviation.
Operations Are Not a Straight Line
Most operations do not have constant consumption or production. Every energy source or consumer has its own typical profile. Consumption may rise in the morning, fall in the afternoon, and rise again in the evening. In industry, shifts, technological cycles, and outages are added to the mix. For heating plants, it’s the weather and the system’s heat demand. And today, this profile is evaluated in 15-minute intervals. Just a few years ago, the market was simpler. Hourly trading could smooth out minor inaccuracies. Today, that no longer works. Every 15 minutes counts separately—and every inaccuracy shows up.
When facilities discuss purchasing electricity, the debate usually boils down to two options: fixed or spot. At first glance, a fixed price seems like a sure thing. In reality, however, it works differently. A trader typically looks at the facility’s historical data, statistically assesses its typical behavior, attempts to lock in most of the profile on the long-term market, and creates a price offer based on that. This price also includes coverage for typical deviations and projected prices on the day-ahead market. And the less predictable the facility is, the higher this risk premium becomes. As a result, the fixed price often includes a buffer that can amount to tens or even hundreds of crowns per megawatt-hour. In some cases, this amounts to a difference of five, ten, or even thirty percent of the electricity price. Simply put—the customer isn’t just paying for electricity. They are clearly also paying for the unpredictability of their own operations.
The spot product aims to reflect market realities more closely. The price is based on actual market developments on an hourly or even quarter-hourly basis. But even that doesn’t solve the problem on its own. After all, if a trader doesn’t know how their customer’s operations will run tomorrow, they still have to rely on statistics. And as soon as the actual profile differs from the planned one, a deviation arises, along with associated costs that the trader factors into the total price. That is why today, the ability to plan and maintain an operational profile is far more important than the product itself—whether fixed or spot.
How the Actual Daily Schedule Is Created
Energy trading is not, in reality, a one-time purchase or sale of electricity. It is a process consisting of several layers. The first layer consists of long-term purchases or sales on the forward market to cover the basic shape of the annual profile. This secures the basic volume of energy—for example, for a year, a quarter, or a month. However, this so-called baseload assumes constant 24-hour consumption—and in reality, almost no actual operation behaves this way. That is why the second layer comes into play—daily planning. Every trader must decide each morning how operations will function the following day. It is necessary to predict what consumption and generation will be, which sources will be in operation and when, and also how the weather or consumer behavior will affect this. All of this influences the resulting price of individual 15-minute intervals, which no one knows exactly in advance. But the story doesn’t end there.
The energy sector is heavily dependent on real-world conditions. All it takes is a change in the weather, a technical malfunction, or a minor operational adjustment—and the plan no longer matches reality. That is why there is a third layer of trading: the intraday market. In this market, trading positions are continuously adjusted throughout the day based on how reality differs from the original plan. The goal is to minimize the deviation and avoid costly and price-wise highly unpredictable balancing energy. But even here, absolute precision is impossible to achieve. There will always be some discrepancy that the transmission system operator must balance. And it is precisely at these moments that the price of balancing energy can skyrocket—for example, during an outage of a major power source or transmission line anywhere in interconnected Europe.
All of this leads to a simple conclusion. Even a technologically advanced source can be economically unprofitable if it generates at the wrong time. A difference of just a few hours is enough. It’s enough to miss the price peak. Or to generate at a time when there is a surplus of electricity in the grid. A typical example is cogeneration units, which historically ran continuously thanks to operational support or based on heat demand. Under new market conditions, however, it may be much more advantageous to operate them as a peaking source—that is, to generate electricity mainly during the hours when it has the highest value. Technologically, this may be more demanding. Economically, however, it is often significantly more advantageous.
Daily communication is key
All of this points to one important fact: energy trading today cannot function without daily communication between the trader and operations. It is not enough to sign a contract once a year and consider the matter settled. It is necessary to work with the operational plan every day, update it based on actual conditions, and continuously respond to market developments.
This is precisely where ORGREZ TRADE’s approach differs from that of a typical electricity trader. The foundation lies in daily work with operational data, as well as long-term planning—from operational campaigns to scheduled outages. Every morning, a forecast of production and consumption is generated, which the client can adjust based on the actual state of the technology—such as unexpected failures or operational changes. Based on this data, price forecasts, and weather forecasts, an optimized operational plan for the following day is created. This plan may, for example, recommend when to start a cogeneration unit, when to charge thermal storage, or when to generate heat from another source instead. The goal is always the same—to generate and consume energy at the moment when it makes the most economic sense. It is clear that such communication cannot take place effectively over the phone or via email. That is precisely why, together with NITES, a.s., we have developed the ENEXA system, which handles daily planning, communication, and trading.
ORGREZ TRADE does not limit itself to trading alone. Thanks to its many years of experience in operating energy sources, it is able to combine trading with asset management and technical consulting. This means not only trading energy, but also assisting operations with long-term planning. For example, when and in what volume to lock in electricity prices, when to purchase fuels, how to plan investments, outages, repairs, and maintenance, how to set heat pricing, or which technology could bring the greatest added value.
The result is the integration of three worlds that have long been separate in the energy sector—technology operations, energy trading, and strategic investment planning. And it is precisely in this integration that the greatest economic value is created today.