The world of Data Science, year after year, is increasingly permeating towards the Energy sector, within which Artificial Intelligence techniques are being used to support an array of strategic decisions of various market stakeholders. One of the cases, perhaps less known, of this reality is represented, for example, by the predictive analyses that are used to optimize trading within the Power Exchange market.
Although it is now nearing its 13th birthday, few are aware of its existence and the dynamics that characterize it. For this reason it seems appropriate to provide some notional pills on the Power Exchange, also known as IPEX (Italian Power Exchange).
It is on the Power Exchange that producers and energy suppliers exchange the quantities of electricity that will later be used for the supply service intended for end consumers.
Energy trading takes place daily on an hourly basis, according to a defined “marginal price” system. This price, which represents the consideration for which the energy is purchased, corresponds to the so-called PUN (translated as “Single National Price”), i.e. the average price that is formed on the Stock Exchange. The PUN is in fact the result of the auctions that cover the energy demand foreseen for each hour of the following day.
These operations, aimed at matching supply and demand, take place electronically every hour and the correct functioning of the system is regulated, in economic, legal and qualitative terms, by the company Gestore dei Mercati Energetici (GME).
However, it should be pointed out that, although the Power Exchange can be defined as the main driver of the electricity market, it only affects one sphere of many. In fact, based on the temporal order and the type of operators involved, the electricity market is divided into different sub-types:
- READY MARKETS: Markets attributable to the Power Exchange and, therefore, to the management of GME:
- DAY BEFORE MARKET (MGP). The MGP market is an auction market where energy is traded on an hourly basis for 24 hours the next day.
- FORWARD MARKET. Market for the negotiation of future (forward) energy contracts with the obligation of delivery and collection.
Each of these areas of the energy market presents complexities that cannot be addressed accurately in a short article. However, with this brief description of the markets and the Power Exchange, it is hoped that we have aroused the curiosity that a sector like this deserves, which with the transition from the protected market to the free market will certainly capture increasing attention from various stakeholders.
Author: Francesca Giannella | Senior Data Scientist DMBI Photo by Matthew Henry on Unsplash