Arbitrage on the Electricity Market

Main types of arbitrage

1. Cross-border / Cross-zone

   Buy in one price zone (or country) and sell in another when transmission capacity allows.

   Example from the video: you can sell in Finland and someone in France will buy — the trader does not care who is on the other side as long as the grids permit the flow.

2. Day-ahead vs Intraday

   The difference between the next-day auction price and the current intraday price.

3. Negative prices as arbitrage

   Buy (effectively get paid) during surplus generation → sell later when the price turns positive.

   The classic version requires storage (batteries), but a purely financial version also exists via derivatives and closing before delivery.

4. Intra-day time arbitrage

   Buy a cheap daytime interval → sell an expensive evening interval (when the sun sets and demand rises).

What is required for arbitrage

• Real-time data on spreads between zones
• Understanding of network constraints (congestions)
• Reaction speed (algorithms have an advantage here)
• For the physical version — access to batteries (they can be rented for a day or a week)

Agent idea

Cross-Zone Spread Agent

Continuously calculates spreads between key European zones.

Alerts when the spread moves beyond historical percentiles and there is confirmation from generation/weather/network constraints.

A separate sub-agent can monitor the appearance and depth of negative prices.