Electricity Trading Market to grow by USD 118.4 Billion from 2024-2028, driven by increased vendor collaborations, with AI impacting market trends - Technavio

NEW YORK, Oct. 21, 2024 /PRNewswire/ -- Report on how AI is redefining market landscape - The Global Electricity Trading Market  size is estimated to grow by USD 118.4 billion from 2024-2028, according to Technavio. The market is estimated to grow at a CAGR of about 6.6%  during the forecast period. Rise in vendor collaborations is driving market growth, with a trend towards rise in entry of new players. However, self-generation of electricity and growth in adoption of microgrids  poses a challeng -Key market players include Axpo Holding AG, BP Plc, Deutsche Borse AG, Energy Trading Co. Sro, Equinor ASA, Euronext N.V., Fortum Oyj, Indian Energy Exchange Ltd., Intercontinental Exchange Inc., Japan Electric Power Exchange, JSW Group, Manikaran Power, Next Kraftwerke GmbH, NTPC Ltd., Power Exchange India Ltd., Statkraft AS, Tata Power Co. Ltd., Vattenfall AB, and VECO Power Trading LLC.

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Key Market Trends Fueling Growth

The electricity trading market provides a platform for businesses to enter into contracts for buying and selling electricity on a daily, next day, and weekly basis. Two operating power exchanges in India, IEX and Power Exchange of India (PXIL), facilitate these transactions. Global vendors are expanding their presence in the deregulated electricity sectors of countries like Japan and China. China is separating the transmission and distribution businesses of its grid operators, allowing power producers to sell directly to consumers through pilot reform programs. The increasing competition among new market entrants will drive the growth of the global electricity trading market. 

Electricity trading is a significant part of the energy industry, where power generators and suppliers buy and sell electricity to consumers and system operators. The market's trend includes a growing history of auto-investments, price charts, and contracts based on generation data. Investors closely watch the global crypto market and electricity prices, influenced by weather conditions and ancillary services like frequency, voltage, and reserve power. Power stations provide units of electricity, which consumers use for lights and appliances. System operators balance the electricity system, ensuring frequency and voltage stability. The European Green Paper and Lisbon Strategy aim to liberalize the energy market, leading to vertical integration and short-term trading. Power purchase agreements, OTC trading, and energy market participation by generators, suppliers, and consumers are essential. Environmental impact, energy storage, timing, and the role of conventional power industry are crucial considerations. Ancillary services, such as frequency regulation and voltage support, ensure system reliability. Balancing groups manage forecast deviations, and the electricity system adapts to the evolving energy landscape. 

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• Microgrids and self-generation of electricity through renewable sources, such as solar panels and small wind turbines, are becoming increasingly popular substitutes for electricity trading. These methods enable businesses and homes to produce their electricity locally, reducing their reliance on utility companies. While the initial investment can take years to reach breakeven, the long-term cost savings make it a more economical alternative. Microgrids, designed to operate in synchronization or autonomously with a national grid, are particularly beneficial in regions without centralized grids due to natural calamities or unfavorable terrain. They provide reliable and secure electricity to remote rural areas by operating independently of the main power grid. As of 2022, over a billion people worldwide lack access to electricity, primarily in Asia and Africa. Microgrids offer a viable solution for electrifying rural areas through solar PV systems, storage systems, and generators. Additionally, large-scale industrial and commercial buildings can become self-sufficient in electricity supply and heating through microgrids. The adoption of microgrids and self-generation of electricity will negatively impact the growth of the global electricity trading market. This trend is driven by the increasing popularity of clean energy and supportive government policies.
• Electricity trading markets face various challenges in ensuring a reliable and efficient energy system. Clearinghouses facilitate transactions between buyers and sellers, but locational marginal pricing and clearing prices must consider grid location and marginal cost to avoid congestion and price differences. Transmission grids, power lines, and substations require maintenance to prevent wear and tear, much like roads and traffic jams. Low-cost generators may not always be in the same grid location, leading to transportation costs and congestion. Economic activity, weather, and fuel prices impact energy cost and availability. Construction costs, fixed costs, and physical factors add to the complexity. Renewable energy sources like wind and solar power bring new challenges, such as intermittency and availability. Consumer protection, Independent System Operators, and power plant dispatch are crucial for managing the grid. Derivatives products like energy futures and forwards help manage risk, while crypto-asset exchanges offer competitive fees and customer support for trading securely. Net metering, tax incentives, and homeowners with sustainable and energy-efficient homes contribute to a more efficient system. Renewable Energy Certificates balance the market and promote clean energy.

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Segment Overview 

This electricity trading market report extensively covers market segmentation by

1. Type 
• 1.1 Day-ahead trading
• 1.2 Intraday trading
2. Application 
• 2.1 Industrial
• 2.2 Commercial
• 2.3 Residential
3. Geography 
• 3.1 Europe
• 3.2 APAC
• 3.3 North America
• 3.4 South America
• 3.5 Middle East and Africa

1.1 Day-ahead trading-  Day-ahead trading is a type of electricity market where participants voluntarily enter into financially binding contracts to buy or sell electricity for the following day. This trading takes place in various exchanges such as EPEX Spot in Paris, EXAA in Vienna, and through OTC contracts. The schedule prepared from these bids is subject to network security and real-time constraints. Day-ahead trading occurs daily, with order entry, revision, and cancellation allowed from 10:00 am to 12:00 pm the day before delivery. This market is widely implemented in regions like North America and Europe, where it enhances system reliability, improves market efficiency, reduces costs, and offers environmental benefits, risk management, customer service improvements, and market power mitigation. These factors are expected to drive the growth of the electricity trading market during the forecast period.

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Research Analysis

Wholesale energy markets refer to the platforms where electricity is bought and sold between power generators and electricity distributors or large consumers. These markets operate in real-time to balance electricity supply and demand, making them distinct from traditional financial markets dealing with equities, bonds, and commodities. The electricity market involves various players, including system operators, power stations, and consumers, who engage in power trading through contracts and short-term transactions. The design of electricity markets is crucial for ensuring a stable power grid and efficient energy system. Generation data, news reports, and ancillary services like frequency control are essential components of these markets. Power stations provide the electricity, while consumers use it, and the system operator manages the grid and ensures the balance between supply and demand. Power purchase agreements and energy market rules govern the transactions between the parties. The European Green Paper and the Lisbon Strategy have influenced the development of electricity markets in Europe, promoting the liberalization of the energy industry and the integration of renewable energy sources.

Market Research Overview

Electricity trading markets refer to the wholesale markets where electricity is bought and sold as a commodity. These markets operate similarly to traditional financial markets, dealing with equities, bonds, and commodities, but the unique nature of electricity requires specialized market design. Wholesale electricity markets consist of real-time markets and day-ahead markets, with traders, utilities companies, and energy providers participating. The electricity grid functions as a complex network topology, akin to a highway system, with electricity pylons as the power lines, substations as the rest areas, and generators as the drivers. Market operators, ISOs, and exchanges act as the highway system's traffic controllers, managing grid operations, balancing supply and demand, and ensuring grid reliability through locational marginal pricing and clearing prices. Price volatility, driven by factors like weather, economic activity, fuel prices, and availability, influences the profitability of electricity trading. Traders, including professional and institutional traders, use various strategies like hedging and arbitrage to manage price risks. The electricity market landscape includes generators, load-serving entities, and bilateral EEI agreements. Renewable energy sources, such as wind and solar power, are increasingly integrated into the grid, with net metering, tax incentives, and consumer protection playing essential roles in their adoption. Physical factors, including construction costs, fixed costs, and wear and tear, also impact the electricity market. The efficiency of consumption and availability of various fuel sources further influence the market dynamics.

Table of Contents:

1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation

• Type
• Day-ahead Trading
• Intraday Trading
• Application
• Industrial
• Commercial
• Residential
• Geography
• Europe
• APAC
• North America
• South America
• Middle East And Africa

7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Trends
10 Company Landscape
11 Company Analysis
12 Appendix

About Technavio

Technavio is a leading global technology research and advisory company. Their research and analysis focuses on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions.

With over 500 specialized analysts, Technavio's report library consists of more than 17,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio's comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

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SOURCE Technavio