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NETWORK / 10 / DECEMBER 2019 / JANUARY 2020 FLEXIBILIT Y Energy trading in a 'flex' market Dominic Fava, head of marketing and propositions at Origami, a provider of energy trading platforms, looks at the difficulties of trading energy in a more flexible – and therefore volatile – electricity market, and how a new generation of smart IT systems will be needed to support energy companies F or a two week period in May 2019, Great Britain met its electric - ity needs without burning coal. This was the longest period that the country has gone coal-free since the 1880s. The coal-free fortnight followed a period of one week without coal earlier that month, and a further period of 90 hours without coal over the Easter weekend. Ac - cording to Finton Slye, director at the National Grid Energy Sys- tem Operator (ESO), this trend of providing for Great Britain's energy needs without coal is the "new normal". The UK has committed to eliminate coal completely from its energy mix by 2025. In 2014, coal produced 30 per cent of GB's energy; by 2019 there were just seven coal-fired power stations still operational, together contrib - uting around 11 GW of generation equivalent to around 13 per cent of the installed capacity of major power stations (based on 2018 figures) and around 5 per cent of UK electricity generation. As the first major economy in the world to pass net-zero emis- sions law, the UK has signalled its intent to eliminate its dependence on fossil fuels. With renewable energy set to replace much of UK's lost thermal power generation capacity, we need to ensure that there is back- up capacity to accommodate the real-time variations in renewables output, as well as multi-day wind lulls and cloud cover. We also need to prepare for more financial volatility in the energy trading markets. Managing financial volatility The record coal-free period in May 2019 was characterised by some extraordinary volatility in the energy markets, includ- ing around 11 hours of negative pricing in one 24-hour period. Negative prices – where power suppliers have to pay their wholesale customers to buy electric energy – are the result of high and inflexible power generation corresponding with periods of low demand. The growth of renewable energy, particularly wind (which ošen has high generation when demand is low), and the move in 2018 to change how system prices for imbalance cost are calculated, has made negative pricing increasingly common. The consequence of increased market volatility that comes from increasing renewables penetra - tion is that energy traders are exposed to higher levels of risk in an environment with lower mar- gins. Higher risk is then reflected