AleaSoft Energy Forecasting, September 19, 2025. Energy trading is now essential for managing risks, optimising assets and providing stability in a volatile market. It is no longer the exclusive domain of banks or large corporations, it also involves retailers, renewable energy producers, industrial consumers or battery operators. Its effectiveness depends on having reliable forecasts to anticipate prices, demand, renewable energy generation or weather conditions. Trading is the tool that turns market uncertainty into opportunities and resilience.
Energy trading is, more than ever, a key activity for profitability, risk management and the efficiency of the electricity system. Although it is often associated only with large companies or investment banks, its relevance extends from retailers to renewable energy producers, including electro‑intensive consumers, battery operators and investment funds. Understanding what energy trading is, who carries it out, with what objectives and why forecasts play a fundamental role is crucial in the increasingly volatile and demanding market context.
What is energy trading?
Energy trading is the activity of buying and selling energy or energy‑related products, i.e. electricity, gas, CO₂ emission allowances, guarantees of origin, etc., in organised markets or through bilateral transactions, with the objective of generating profits, reducing risks or fulfilling contractual obligations.
Trading is not limited to the physical purchase and sale of energy, electricity or gas. It also includes financial products such as futures, options and swaps, which make it possible to hedge prices, speculate on market movements or cover exposures.
Who trades energy?
Energy trading is no longer the exclusive domain of a few financial experts, but encompasses most players in the sector, each with their own objectives. Retailers seek to optimise their buying position in the electricity market, balancing the cost of acquisition with the selling price to customers in order to maximise margins or avoid losses. Energy producers, especially renewable energy producers, sell their generation on spot markets or through forward contracts, such as PPA or futures, and use trading as a hedging mechanism against possible price fluctuations or deviations from forecasts.
For electro‑intensive consumers, such as the steel, aluminium or chemical industries, the priority is to mitigate exposure to energy price volatility by securing predictable future costs. Operators of energy storage assets, mainly batteries, engage in “physical” electricity trading by taking advantage of hourly, daily or weekly price differences to generate revenues, a strategy that relies on correctly anticipating market rises and falls.
Meanwhile, investment funds and financial traders participate in these markets seeking profitability.
Why trade energy?
Energy trading serves a range of strategic purposes that are essential in today’s volatile market context. First, it acts as a risk management mechanism, enabling buyers to protect themselves against high prices and sellers against low prices. It is also a tool for maximising profits by taking advantage of opportunities to buy at lower prices and sell at higher prices over time horizons of hours, days or months.
Another function is arbitrage between markets, exploiting price differences between markets, for example, spot and futures markets. Trading also plays a fundamental role in asset optimisation, particularly for storage and flexibility, where the value derives from the spread between high and low prices.
Finally, trading is essential for contractual compliance in PPA or bilateral contracts that require the delivery of energy under specific conditions. Without trading, these agents risk breaching contracts or regulations, with the associated penalties. Ultimately, energy trading transforms market uncertainty into opportunity, mitigates risks and even optimises revenues.
Why are forecasts so important for energy trading?
Energy trading is not a blind bet but an activity based on forecasting models. In markets that are highly sensitive to external factors such as weather conditions, electricity demand, renewable energy generation or fuel and CO₂ prices, having reliable forecasts makes the difference.
Forecasts make it possible to anticipate the evolution of spot and futures prices, renewable wind and solar energy generation, electricity demand on hourly or daily horizons, as well as the availability of international interconnections. They are also essential to predict critical weather conditions, such as cold or heat waves, wind or rainfall, and to identify scenarios of congestion or market decoupling.
Without accurate forecasts, trading is reduced to a lottery. With quality forecasts, it becomes a tool for profitability, risk management and resilience in a highly volatile environment.
To obtain accurate forecasts and support trading decisions, it is necessary to rely on a robust, comprehensive and dynamic database such as the Alea Energy Database. This tool is a centralised data platform, bringing together all spot price, demand, fuel, CO₂, weather and futures curve data. These data are continuously updated, with configurable alerts to monitor volatility. It enables advanced market analysis, comparing historical series, moving averages and dynamic ranges with interactive visualisations.
Who should trade energy?
In today’s complex energy market, practically all agents need, directly or indirectly, a trading or hedging strategy. Even those without dedicated teams can rely on platforms, wholesale agreements or external advisors to manage their exposure to risk.
Small retailers, even without trading teams, can use such solutions to balance their market purchases and avoid losses. Renewable energy developers, even with PPA signed, require trading strategies to hedge profile risks and deviations, while for projects without long‑term contracts, trading is fundamental to maximise revenues.
Industrial consumers, particularly electro‑intensive consumers, cannot bear the risk of unexpected price spikes, so they usually combine indexed contracts with partial hedges to stabilise their costs. For projects with batteries, trading is at the core of their activity and their profitability depends on correctly forecasting price evolution and operating in line with those signals.
Finally, investors and asset managers also need trading or hedging strategies to stabilise cash flows and properly value their assets in an environment of high uncertainty.
The evolution of energy trading: from risk to strategy
Energy trading has evolved from being an activity reserved for financial experts to becoming an essential tool for the strategic management of any company in the energy sector. Increasing volatility, the massive integration of renewable energy and regulatory uncertainty mean that not participating in the market with an active or hedging strategy is riskier.
In this context, forecasts of price and other market variables are indispensable. Ultimately, in energy trading, knowledge of the future, even if never perfect, is the best defence against uncertainty.
The role of trading in the energy transition
This article is part of a series dedicated to the different groups of agents operating in the energy sector. Each instalment analyses the challenges, needs and specific tools that enable these actors to progress in an environment shaped by the energy transition. So far, articles have been published on industry and large consumers, retailers, generators (Utilities and IPP), control centres, and renewable energy and energy storage systems. Future publications will cover other groups, such as electricity system operators (TSO), and actors linked to renewable fuels, such as green hydrogen, methanol, ammonia or biofuels.
AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe, energy storage and renewable energy project financing
The 58th webinar in the monthly webinar series organised by AleaSoft Energy Forecasting took place on September 18. In addition to the evolution and prospects of European energy markets, the webinar analysed prospects for energy storage with batteries and self‑consumption. AleaSoft services to improve retailers’ strategy, management and planning were also presented.
Continuing the analysis of renewable energy and storage, the 59th webinar will take place on October 9. For the sixth consecutive year, guest speakers from Deloitte will participate in this webinar. The topics to be addressed will include the evolution and prospects of European energy markets for the winter 2025‑2026, the financing of renewable energy and energy storage projects, prospects for batteries and hybridisation, and the importance of forecasts in audits and portfolio valuation.
Source: AleaSoft Energy Forecasting.