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Virtual Bidding

Virtual bidding is a trading strategy used in electricity markets where market participants can place bids on electricity prices in the day-ahead market without physically supplying or consuming electricity. It allows traders to profit from differences in electricity prices between the day-ahead and real-time markets. Virtual bidding enhances market efficiency by reducing price volatility and helping align day-ahead and real-time prices through arbitrage opportunities.

Example

A trader places a virtual bid to buy electricity in the day-ahead market at a lower price and sells it in the real-time market at a higher price, profiting from the price difference.

Key points

• A trading strategy in electricity markets involving bids in the day-ahead market without physical delivery.

• Allows traders to profit from price differences between day-ahead and real-time markets.

• Improves market efficiency by reducing price volatility and aligning prices across markets.

Quick Answers to Curious Questions

It helps align day-ahead and real-time prices by allowing traders to profit from price discrepancies, leading to more efficient market operations.

They place bids based on anticipated price differences between the day-ahead and real-time markets, earning profits from these price fluctuations.

By allowing arbitrage between day-ahead and real-time prices, virtual bidding helps stabilize prices and reduce volatility, improving market efficiency.