From Prices to Value: Monetising Volatility with a Flexible Portfolio | Jorim de Boks, TTEP

Yes, My name is Joram De Box, Manager of the Analytics team at TTP. I'm not a consultant, but still we have a new company, so also a slide on the company itself. So TTP established this year as a partnership between Total Energies and EPH. We are active in four countries, France, Italy, Netherlands, UK and Ireland. And of course I'm from the Dutch office located in Middelburg. TTP, Netherlands, let's go back one slide. We have four CZTs, 2.6 gigawatt in sold capacity and the best. Italy and UK, a bit bigger in size and in France we are relatively small. The Dutch office focuses actually on three key pillars. Supply, supply to B2B businesses. to whichną. about the presentation. I think we discussed a lot of things about fundamental developments. I think Andre did a good job there. And the previous presentation about the imbalanced market. I would like to add some figures. I will not give outlooks, but look back and see what trends we can derive from that and the volatility we have seen in the past or the trends we are seeing and how with those volatilities we can get the most value out of, for instance, a battery or CCT assets. I like to talk a lot with graphs. So in this, here you see the base load power prices in the Netherlands for the spot market, the blue line and the variable cost of a gas asset. And you can see directly that the variable costs of a gas asset and the spot price are very aligned. The gas still setting the price a lot of the hours in the Netherlands. Another important thing to clearly observe is the sharp increase in variable cost and power prices in the course of the summer. Due to the high gas prices. We still see that the gas curve is in backwardation. So power prices in the future are expected to decline. If gas prices really go to 30 euro next summer, then this decline would go way, way faster and we will reach 70, 80 euro levels also for power back then. For a gas asset, we are not interested in the power price itself but in the spark spread. The price difference between the power price and the variable cost of a power plant. And over the last years, on a monthly basis, this base load spark spread has been negative and also in the forward, it's priced negative. That tells only a very, very small part of the story because the peak spark spread is increasingly becoming volatile and is over the recent years in the spot market but currently also in the forward market significantly positive. So these jumps in the summer period or in the winter period where we see big spikes, monthly peak products above 20 to even reaching 40 euros for an efficient CZT asset. And the dynamic and the amplitude of this shape changed quite significantly also especially after Q1 2024 because up till then, we had a lot of capacity online also at our eastern neighbors, Germany, a lot of coal-fired generation went out then. A lot of those coal assets were already part of a phase-out plan but was delayed because of the energy crisis in Ukraine and to save the gas for gas-fired generations, the extension was for all those coal-fired assets but they all closed their doors end of Q1 2024 and actually since then, the market during winter is much, much tighter. You can see that here in those price spikes. If you would now log in the positive peak spark spread for the winter period trading well above 20 euros these days, an efficient CZT could already secure around 45 euros per kilowatt per year. Later on, we'll see some comparison numbers in the slides but this is way, way higher than we have seen, let's say, one, two years ago. The spark spread and the peak load spark spread tells you only a small part of the story because a gas asset is a real option which you can turn off very fast. So we are actually only interested in the spark spread hours or 50-minute periods which are positive. So if you would floor the spark spread at zero, you arrive at a graph which you see here, the positive clean spark spread that tells much more about the profitability. I want to highlight a couple of points here because we have here the clean spark spread I think this was January 2026 where the clean spark spread was very close to the positive clean spark spread and it really had to do that it's a winter month with not too much solar so a typical week you can see on the left not too much dips below the black line so gas plants were running also quite often and the actual monthly average spark spread was very close to the positive spark spread. For a CCT, it's a very good month. For a BEST, this is far less interesting because on average you see daily price deltas of 40, 50, 60 euros and that's not a lot value to recover per cycle. So that's a winter month and it's actually a typical winter month because in a summer month it looks quite different. This is actually last June and the spark spreads on the monthly average were actually still quite low or close to minus 10 but it actually was one of the most positive months over the last years. Why? Because we had a heat wave all across Europe prices skyrocketed to 800 euros very positive spark spreads. So this delta is very, very big very high revenues for our CCT assets based on spark spread relatively low. And also these are very interesting days for a battery of course where you can earn almost 800 euro period spread on one single day. This is very simple calculation and gas asset has to deal with a lot of operational constraints start cost variable operating cost ramp restrictions. So if you would put all those hourly prices and the gas and carbon prices in an optimization and assuming 100% availability this will be more or less the achieved spark spreads. So for 2025 the base load spark is 1911 the positive 10.5 the achieved one 8.5 so then the realized value will be 75.2 thousand euros per kilowatt per year. What's interesting to see here is that indeed the realized margin of a CCT is really following this positive spark spread level quite well but over the last summer we see much bigger gaps and that's actually an interesting one. You can see an example week on the left where we see a lot of prices going towards zero and then reaching 120, 130 euros in the evening where you still have a positive spark spread but it's quite costly to capture those sparks spread with the gas asset because you have to start up your unit which is off more than 10 hours usually then start up costs are increasing much faster and that makes these peak moments very hard to supply with your gas asset and I think especially for these periods batteries can play an important role because it's relatively easy to capture this abundance of solar energy and discharge your batteries here during the evening period. One last thing is the utilization of the CCT so it's actually increasing over time I have to say 2026 is up to September end of September and usually the utilization in the Q4 is even a bit higher and that indeed has to do with a couple of important trends next to some phase out of some coal fire generation in Germany we also have phasing out several nuclear plants in Belgium now the last two nukes are in summer maintenance for a period of seven months I think they should come back next week but that drives up the utilization because the renewable growth while we saw that the growth should skyrocket still in the coming years over the last two years it's slowed down a lot we add now around 1 gigawatt for solar a year offshore wind is also very actually stable and offshore wind some parks are now being constructed but then also the growth is especially expected after 2032 again because in 2030 2032 I think 12 to 13 gigawatt can be installed and afterwards we might grow to the 30 gigawatt target by 2030 so more room for CCTs at least these years when we go to the next slide and I think we already heard a lot about the balancing market in the previous presentation so let me just focus on a couple of observations really related to the prices so one thing we see that if you look to the distribution of the gross imbalance it's getting a bit wider I think this has for a significant part to do with the passive steering which is becoming more and more dominant but what I think is the most interesting part is that due to Picasso a lot of also competitive supply has been unlocked because if this gross imbalance in the Netherlands is big and I take an example of minus 500 so the system is quite short in 2024 you will pay a premium on top of the average spot price of 260 euros per megatower 270 euros megatower in 2024 and 2025 it dropped considerably to 53 euros per megatower in 2026 so there is much more competitive supply which makes it much more easy to solve imbalances in a system at much more competitive prices and in a next graph this distribution was actually the distribution I forgot your name but what we were talking about this is the third to 97 percental distribution the color is not too great I have to say but before Picasso it was really wide going from minus 200 to 4600 but afterwards we had Picasso implication more and more countries were adding also entering Picasso afterwards November we still had one oh wait one sec November we had one spike but that was one particular day which was really extreme also in gen 25 then it started to procure more A4R energy that also helped reducing the volatility in the imbalance market because after that period we can see that majority of the distribution is actually clearing between minus 50 and 200 euros or even a bit narrower also the entrance of the 50 minute auctions already solves part of the entire hour shape also could further lower the price distribution now it's getting up a bit also has partly has to do with higher gas prices in general that also leads to bigger absolute price differences in the imbalance market I deliberately selected the 3 to 97 percentile because I booked the first and 99 then my graph would directly explode because then indeed see that over time the distribution would get much wider because we see much more extreme bits on the bit price ladder they get activated less frequent but if they get activated you do directly can have very high or very low imbalance prices when we go to the next slide this is actually the state 2 situation which observe in the dark blue line it's occurring more and more and more frequent I think indeed the average over this year I put in the slide 38% which I think it's now already exceeding 40% and what's also interesting to look is what is the average different between the feed and the take price that you can see on the left axis that's actually a bit more stable so it occurs more and more often but the average price difference between the feed and the take price in the Netherlands is narrowing a bit so that offsets each other a bit but in general it is a big development and it also creates uncertainty in offering your flexibility or monetizing your flexibility in this passive imbalance steering market so indeed you see developments more going towards the AVR energy bids but also towards other markets because in the past you saw very big spreads in the imbalance market so in the right graph you can see the two hour highest prices on the imbalance market and on the day market and the lowest so the price difference between the two and you can see two key developments for the imbalance market is dropping a lot so if you would have perfect foresight for all the imbalance prices this is the maximum theoretical spread you could capture with your battery that dropped a lot so there is less value there well the number of state two situations is increasing drastically so that adds to the uncertainty there well the lower line is the price spread on the day ahead market it's considerably lower but it's trending up and it's more in line with the imbalance market at the end so we also see much more a shift in okay from passive imbalance preparing more towards intraday optimization day head optimization or AVR energy bits so that's on the balancing markets then another important value driver of flexibility are the AVR capacity fees perhaps it's not the biggest market but for especially these days for small scale battery installation it can definitely add quite some money to the proposition on the left graph you can see the up and down prices a month so the blocks are the capacity wasn't always procured on a daily basis and those daily capacity prices is visible in the blocks but since September or November 25 it's also now being procured with four hourly blocks it started with very small volumes but I think from this week then it now risen this year to 70% so the majority of the AVR contracted volume is now tendered via the four hour blocks if we look to the daily we can see a bit of a downward trend in the prices the four hour looks a bit volatile I think it's also a market which needs to be a bit more mature the one thing about this outlier I think then there was a fire balancing platform and that disabled a lot of the flexibility from small scale players so there we saw a couple of days with very extreme balancing or AVR prices but it's not representative for the future then the last months we can see that the prices for AVR capacity are more and more aligned and here you can see the yearly averages that for 2026 up 22.1 versus 28.3 for the capacity when we compare this with Germany because Germany already has quite some time the four hourly blocks we can still see much lower prices so 14.6 for the up block and 10.2 for the down block of course Germany has already a bit more best installed and it works already much longer with the four hourly blocks so I think this market is trending down a bit and this is actually despite very strong gas prices and that actually usually supports the AVR capacity prices so it's a market in a bit downward trend but still for best asset still an interesting revenue driver so when I go to my last slide a couple of key messages so currently the CCT assets traditionally also drive the majority of the value from day ahead markets and of course balancing market and with also intraday and AVR can add value but the majority is still coming from the wholesale day ahead market for for battery you can switch and cross optimize between markets that's important and that's also where the competitive edge of an optimizer lies I just put some indicative numbers if you do a relatively simple optimization on the day ahead market or in an imbalanced market or based on the AVR capacity market in standalone valuations what the market revenues would be in the past and then you can see that for the best the day ahead seems to be more and more interesting directly after say 2026 usually Q4 is the most profitable year for CZT and a bit worse for battery capacity what we see is that with more and larger best entering the system they have to compete more and more for the intraday flex value and one of the last key messages is that during the summer periods the price differences are big because prices go to zero renewable is curtailed and evening gas prices set the price and I think there the best can push gas assets out of the market quite fast in the winter we see something different because there we have lower renewable output of course we have the wind but that's not sufficient to meet the full demand so we have more stable spark spread also usually resulting into higher revenues and there can see smaller time spreads and much lower revenues of the batteries so here can see higher revenues of the CZTs during the winter low of the best we also saw that over here but I also expect that to occur in the coming winter and one last thing is that for the batteries they have the grid fees and that's of course we talked about it a couple of time but what does that now mean and what is the cost of those grid fees so I just as a reference these are the proposed KBmax grid fees for the high voltage grid of Tenet this is only the variable part but it's 100% so if can lower it a bit but if do a simple optimization it will be hard in the winter months to recover your grid fees so that's an important thing to have in the back of your mind when also operating a battery and it can even be an optimization to not deploy your battery in the winter because it's not profitable and only do it in the summer period especially if gas prices go to 30 we will see much lower period spreads within the day lower value for batteries and it might be difficult during the winter months to recover your grid fees I see I have to so but thanks a lot and you're excellent thank you very much let me know