How Does Power Trading Work? (Real-Time Trading)

It’s 2 a.m. While most people are sleeping, real-time power traders are working through the night, helping ensure that consumers have power when and where they need it. They work in 12-hour shifts, typically from 5:30 p.m. to 5:30 a.m. and vice versa.

The shift change is a critical time to hand off essential information about what trends to watch. 

During a shift, traders are glued to their desks because their job is mission-critical. The power grid doesn’t “sleep” and market activity continues 24/7. Real-time operations match generation with demand and make real-time decisions year-round. 

What Is Power Trading in Real-Time? 

There are several types of real-time power traders. We’ll discuss the physical side of real-time power trading, which involves activities such as balancing positions in real time, monitoring assets, and moving power from one location to another. 

This is essential because power plants must generate electricity and deliver it to consumers exactly when they need it. While electricity has limited storage such as in grid-scale batteries, power plants largely generate it in real time to balance the grid. 

How Do Real-Time Power Traders Make a Living? 

There are power markets in various regions of North America, and each one has different pricing at different times. Independent service operators (ISOs) and regional transmission organizations (RTOs) supervise the power markets. 

Real-time power traders move power from markets that are currently less expensive and sell it in markets that are currently more expensive to make a profit. 

For example, a power trader could move electricity from the California Independent System Operator (CAISO) to the Electric Reliability Council of Texas (ERCOT) and take advantage of differentials in pricing. Prices often depend on the demand for power, which many factors can influence, such as the time of day or the weather. Higher demand for power in one area generally leads to comparatively higher prices.

How Does Power Trading Work? 

To move electricity from one market to another, a trader has to rent capacity on power lines. 

Open Access Technology International (OATI) is a portal that power traders use to make transactions. They purchase transmission on OATI Oasis and then make an e-tag that represents the physical transaction. Traders turn in the e-tag, and the ISO or RTO collects it and sees the power move from one market to another. 

The system is needed so there isn’t too much power or too little power flowing to one location.

The North American Electric Reliability Council (NERC) is a regulatory agency that makes sure that everyone follows standard procedures. 

How Do Power Traders Know Where to Move Power? 

Power traders need to make a living – which means it doesn’t make sense for them to move power from one market to another if prices are the same.

Instead, they need to find a differential in price. To do this, they use tools such as Yes Energy’s QuickSignals, which provides low-latency power market data to stay on top of market opportunities as they materialize in real time, and PowerSignals, which shows high-quality power market data so they can understand market patterns and inform their trading positions and hedging. 

For example, below you can see Midcontinent Independent System Operator (MISO) load (demand), coming in under forecasted values.

All images from the early morning hours of December 3, 2023, from Yes Energy’s PowerSignals. MISO load coming in under forecasted values.

Here you can see Southwest Power Pool (SPP) load coming in over forecast.

Finally, in this screenshot, you can see a $60 per Mwh price differential. This shows a potential opportunity for a trader to move power from a cheaper to a more expensive location. 

Because of the demands of the job, traders usually don’t adopt new technologies quickly – any unforeseen events can have catastrophic consequences. That’s why traders have come to rely on Yes Energy – we’ve been a market leader in the power industry since 2008 and we partner with traders to help them reach their goals. We’ve worked hard to earn the trust and loyalty of our customers, and as a result, we have a 95% customer retention rate.

What Defines a Good or Bad Day for Traders? 

On a good day power traders earn money for themselves or their firms or mitigate potential losses, and on a bad day they lose money. The decisions they make about the future price of power can result in them making or losing hundreds of thousands to millions of dollars and can contribute to either keeping the lights on or potentially jeopardizing service to the power grid such as during Winter Storm Uri in Texas in 2021. 

Is Energy Trading a Good Career? 

Whether energy trading is a good career for you depends on your skillset, goals, and willingness to take calculated risks. We outlined the path to becoming a power trader, including the skills and experience that help can help you on that journey. 

Yes Energy for Power Traders

Power traders across the continent trust Yes Energy for reliable, accurate data to conduct their businesses. Explore all of our solutions for power traders, including tools for real-time traders and long-term traders. 

Generated through an interview with Jake Landis, Yes Energy solution expert