The Impact of Solar Energy on the Day-Ahead Market: A Data-Driven Analysis Approach

Written by: Ana Angelova, Market Operations Expert,
National Electricity Market Operator – MEMO LLC

Introduction
In recent years, we have witnessed a significant expansion in the use of renewable energy sources. Solar energy plays a particularly important role, as it represents a clean, accessible, and inexhaustible resource. This decreases the dependence on fossil fuels and, at the same time, the negative impact on the environment. But this also brings forth new challenges. Unlike traditional sources such as coal or gas, which can be controlled and planned, solar energy depends on weather conditions and daylight hours. This creates additional difficulties in balancing the electricity system.

Objective of the paper

The analysis aims to illustrate seasonal trends and highlight the correlation between photovoltaic generation, consumption, traded volume on the dayahead market, and the achieved price, taking into account that the day-ahead market operates in an isolated mode, i.e., it is not connected to any other market. Official market data for the entire year of 2024 were used, specifically for hours in which the efficiency of photovoltaic plants exceeded 30%.

Analysis results

What stands out is a clearly defined seasonal dynamic:

Electricity consumption remains relatively stable throughout the year, with minor decreases during the spring and summer months. In contrast, photovoltaic generation follows a pronounced seasonal pattern, reaching its peak in the summer months due to increased solar radiation and longer daylight hours. The lowest levels of photovoltaic plant generation are observed in the winter months, especially in December and January.

As the electricity produced by photovoltaic plants increases, the traded volume on the day-ahead market also rises. Prices are lowest in April, a period that can be associated with milder weather conditions, lower consumption, and increased generation of electricity produced by photovoltaic plants. However, from the summer months onward, especially in winter, prices begin to rise, reaching a peak in November.

The peak in day-ahead market prices in November coincides with a period of low generation of electricity produced by photovoltaic plants and higher consumption.

Increased electricity generation from photovoltaic plants is associated with lower prices, while low generation leads to higher market prices, emphasizing the impact of renewable energy availability on price formation. The trend indicates that energy policies should focus on addressing weaknesses during the winter period and harnessing the potential of solar energy in summer.

Possible solutions

• With the increased share of renewable sources, particularly electricity generated from photovoltaic systems, there is a need for better integration of these sources into the electricity system.

• Several key mechanisms stand out as priorities:

• Flexible market mechanisms

• Short-term market integration (15-minute intervals): Enables faster market response to changes in generation and demand;

• Introduction of an Intraday market: Allows participants to better optimize their portfolios;

• Dynamic Tariffs: Encourage consumers to use electricity during periods of highest photovoltaic generation.

• Guarantees of Origin: Ensure the proven origin of the electricity used by end consumers, reduce the carbon footprint, and create new business opportunities for producers

Energy Storage Technologies

• Battery systems: Store excess energy and use it during evening hours.

• Pumped storage hydropower systems: Use pumped energy as large-scale batteries;

• In addition, harmonization with the European energy framework is essential.

North Macedonia, as a signatory country of the Energy Community, is legally obliged to align its market with EU rules.

This includes:

• Adoption of network codes developed by ENTSO-E, which allow for technical harmonization, interconnection, and flexibility;

• Implementation of market coupling (day-ahead market and intraday market) with the single European market, thus enabling greater liquidity and integration of renewable sources;

• Introduction of smart metering devices;

• Implementation of appropriate financial mechanisms such as Contract for Difference (CfD) and Power Purchase Agreement (PPA) agreements;

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