2025-10-09

Commercial Market Outlook – Balancing Volatility and Ambition

Regulatory shifts and significant energy transitions are reshaping Europe’s electricity market in 2025. Market experts Daniel Ivarsson and Arvid Cederberg analyse the forces driving this transformation and the commercial projects redefining the landscape.

The European Union’s ambitious agenda for clean energy and energy security is driving fundamental changes in how the electricity market operate. These shifts are reflected in the decisions made and actions taken.

“Europe is moving even further towards electrification. With the rise of renewable and intermittent energy sources, the system faces new challenges, and the EU is taking steps to ensure a more balanced and efficient electricity grid.” says Daniel Ivarsson.

Automation replaces manual processes

The first significant change this year was the introduction in March of the Nordic mFRR Energy Activation Market: an update on how the Nordic Transmission System Operators (TSOs) buys electricity balancing services on the market.

“Instead of manually ordering adjustments to electricity production and consumption from the balance service providers through a phone call, these activations are now done by an algorithm”, says Arvid Cederberg.” However, such a huge change inevitably involves challenges in the cross over phase and has created a volatile balancing market. But the project was necessary to pave the way for upcoming market changes.”

From 60 to 15-Minute Market Time Units

October brought another significant shift with the Single Day-Ahead Coupling (SDAC) platform moving from 60-minute to 15-minute trading intervals (15-minute Market Time Unit). SDAC is the primary electricity marketplace where electricity buyers and sellers across Europe submit bids for next-day power delivery. The change addresses a fundamental market inefficiency, according to Arvid Cederberg:

“Supply and demand rarely remain constant for a full hour. With the 15-minute MTU, market participants can place more precise bids that better match actual production and consumption patterns. This means their positions become better balanced at an earlier stage, reducing the need for trading closer to delivery on the intraday market, and lowering risk of dramatic price swings”

The technical achievement behind this change should not be underestimated, according to Daniel Ivarsson:

”Coordinating roughly 50 parties to simultaneously adapt their systems represents one of the electricity sector’s most complex technical projects in recent years.”

Need for more cross-border transmission capacity

Despite ongoing projects, the European electricity market still has a long way to go in creating a flexible and secure system. Today, the system struggles with frequent negative prices, as well as price-spikes, due to its inability to manage the fluctuating surpluses and shortages of intermittent renewable energy sources.

“We must be able to delivery electricity to where and when it is needed. And that requires financial incentives and regulatory frameworks that supports expansion of cross-border transmission lines and storage capacity. We also need better coordination between EU-wide goals and national energy policies. This is essential to drive a renewable and interconnected Europe.”, says Daniel Ivarsson.

Interconnectors, and interconnector TSOs like Baltic Cable, play a vital role in this development.