What Separates Basic from Market-Leading Optimization?

Not too long ago, the global stock market depended on manual trading. It was a time when decisions were based on intuition and deals were made over the phone from chaotic trading floors. The digital revolution then completely transformed the sector. Today, algorithms make stock trading decisions automatically – optimizing every millisecond, and improving both speed and efficiency.

The energy trading sector is currently undergoing a similar shift. Until just a few years ago, bids were primarily delivered via spreadsheets, real-time price forecasts were non-existent, and large utilities dominated the playing field. As the energy system has become more variable and unpredictable, optimization with AI and machine learning has become a foundational tool for driving value.

However, with the rapid developments in the field, asset owners who are benchmarking their future optimizers require clarity: How can slow-adopting actors be differentiated from the industry leaders that truly shape and create long-lasting value?

How can slow-adopting actors be differentiated from the industry leaders that truly shape and create long-lasting value?

The first generation of optimization

In the early days of energy asset optimization, stacking and managing energy assets like EV chargers, home batteries or flexible loads into a single controllable portfolio was virtually enough to gain an edge in the market. This is how many actors started at the dawn of flexibility. Known as aggregators, they used a VPP (Virtual Power Plant) to bundle small assets together and offered smart optimization and trading on ancillary service markets.

Although this broke new ground in the energy sector at the time, the level of optimization and trading these actors provided was initially shallow. Bidding was static and predetermined, and market scope was limited. Moreover, the aggregators relied on an external BRP (Balance Responsible Party) to gain market access and take responsibility for potential imbalances in their operations. This not only limited their ability to access more revenue streams, but also slowed their agility and responsiveness.

Why market access matters, and why it’s not enough

The emergence of large-scale battery energy storage systems (BESS) supercharged the growth of aggregators, allowing them to control more scalable, revenue-generating energy assets. This also opened up opportunities for another niche player: large, often hardware-centered actors, generally offering years of experience in building energy infrastructure and traditional energy trading.

These players had BRP status, with market access to the most lucrative markets, namely intraday and day-ahead. However, in a market that evolves daily, these players often lacked the advanced technology and skillset to trade automatically on these markets, and to optimize assets across them with sophistication – ultimately missing out on a substantial share of potential revenue.

The evolution of optimization: from basic to holistic.

Holistic optimizers lead the way

Today, aggregators have made vast improvements in optimization, but market access is still an issue that clouds their future competitiveness. Although a third-party BRP can open up markets like mFRR and day-ahead, sophisticated trading strategies that enable multi-asset optimization across these markets are, in reality, still rare. The standard BRP players, on the other hand, enjoy wide revenue access but generally fail to deliver competitive returns. Many still rely on manual, predetermined bidding strategies designed for a slower, more predictable grid.

In the trading system of tomorrow, timing and diversification will be critical. The new volatile playing field therefore requires actors that can combine the two vital pillars: wide market access and highly advanced optimization.

The few actors that can do this are becoming known as Holistic optimizers, defined not just by being leaders in optimization and trading, but by being in-house BRPs with direct access to the full trading market palette. These capabilities give them leverage to trade with better efficiency and thereby improve the end value for their customers. It also gives them an advantage in handling substantial amounts of data in-house, avoiding bottle necks with external parties. Through their comprehensive approach, these players gain trust from large industry stakeholders like TSOs, who above all value operational stability. This, combined with their mission to remain adaptable in the ever-evolving trading landscape, makes them resilient as optimizers, fit to handle both today’s and tomorrow’s variable markets.

The forefront of optimization

The global stock market didn’t move from manual to automated trading in one day. It gradually evolved and became more complex as new innovative technology entered and changed the landscape. In energy trading, a similar shift is happening right now. Optimizers that can’t keep up with the pace risk being made redundant as the whole system becomes automated. Staying at the forefront of the fast-moving developments will therefore be crucial in the years ahead.

With over 140 employees, and with 40 people focusing purely on automated trading development, Flower is positioned among Europe’s market leaders. Starting out in 2020 as a pioneer in EV optimization, evolving into the number one BESS optimizer in Sweden, and now operating as a Holistic optimizer with industry-leading algorithms – Flower’s journey is only just beginning.

The future of optimization is both complex and technology-driven. In the end, players that can make sense of this complexity and create long-term value from it will have a clear edge. Getting there requires a strategic approach built on advanced technology and wide market access, traits that will increasingly come to define tomorrow’s leaders.