Physical and virtual trading with C&I battery storage

The energy market is becoming increasingly decentralized. Alongside conventional large-scale power plants, industrial battery storage systems, photovoltaic systems and flexible consumers now play a central role. But how can such decentralized systems participate in the energy market economically? What role does trading play, what distinguishes physical from virtual trading – and how does integration into a Virtual Power Plant (VPP) work?

What is trading?

Trading refers to dealing in electrical energy on the electricity markets. Traders buy and sell power to take advantage of price differences between markets or time periods – much like on a stock exchange.

Germany has several trading venues:

Day-ahead market (EPEX Spot) – trading power for the following day, hour by hour.
Intraday market – short-term trading up to a few minutes before delivery, to offset deviations between forecast and actual generation/consumption.
Balancing group and ancillary services market – this is about stabilizing the power grid in real time.

Trading therefore serves two functions: it enables economic optimization while ensuring that generation and consumption remain in balance at all times.

Physical vs. virtual trading

Physical trading

In physical trading, power is actually delivered or consumed – that is, physically fed into or drawn from the power grid.

Example: The operator of a battery storage system sells 1 MWh of power on the day-ahead market and discharges the storage at the agreed time.

Prerequisite: The participant has access to the grid, technical control over the system and is part of a balancing group.

Virtual trading

Virtual trading means that, although trades are made on real electricity markets (e.g. the day-ahead or intraday market), there is no physical delivery.

In other words: the trader closes their position in good time before the delivery period – so no power is fed in or drawn off.

Example:

A trader sells 10 MWh on the day-ahead market at €100/MWh and later buys it back on the intraday market at €80/MWh.
The profit is purely financial – no power flows.
This principle makes it possible to profit from price differences without operating a system of your own.
Virtual trading is therefore part of the spot market, but without physical activity.

Can you trade virtually without owning your own systems?

Yes – at least in theory. A virtual trader can trade on the spot market without owning physical assets themselves, as long as they close all open positions in good time.

In practice, however, there are two important prerequisites:

Market access:
The spot market (e.g. EPEX Spot) is regulated. Only participants with a balancing group or acting through a balance responsible party (BRP) are permitted to trade there.
This means: even if you do not own a system, you need a partner who could deliver physically if a trade is not settled in time.
Regulatory responsibility:
Virtual traders must ensure that their trading does not disrupt the physical balance of the power grid.
Balance responsible parties are in charge of this, watching over all feed-ins and withdrawals like accountants.

In practice, this means:

A trader can trade virtually even without owning any systems.
An operator or software provider of a VPP, however, needs access to real assets in order to provide flexibility physically should that become necessary.

This creates a tiered system:

Financial traders trade purely virtually.
VPPs trade virtually, but based on physical systems that they can actually deploy when needed.

Why must the system always remain in balance?

Technically, it is essential that at every moment exactly as much power is fed into the grid as is drawn from it.

This balance is ensured by the so-called balancing group system.

Every electricity producer and consumer in Germany is assigned to a balancing group – a virtual energy account managed by a balance responsible party (BRP).

The BRP is, in effect, the “accountant” of energy flows:

It ensures that planned feed-ins and withdrawals are balanced.
If deviations occur (e.g. less sun than forecast), the BRP must compensate for them by purchasing balancing energy.

This keeps the grid stable and prevents frequency deviations.

What is a Virtual Power Plant (VPP)?

A VPP (Virtual Power Plant) bundles many decentralized energy assets – such as battery storage systems, PV systems or flexible consumers – into a single, controllable portfolio.

The VPP performs three tasks:

Aggregation: All assets are connected digitally and their available capacity is determined.
Optimization: Which systems supply or store power, and when, is decided centrally.
Marketing: The VPP acts as a single market participant and can trade energy on the exchange or offer balancing energy.

This allows even smaller systems, which individually would have no market access, to participate jointly in the energy market.

Key stakeholders at a glance

Battery operator / system operator: Provides the flexibility (charging, discharging).
Software provider / VPP operator: Optimizes operation and controls the systems.
Energy supplier / trader: Trades the energy on the markets and bears the market risk.
Balance responsible party (BRP): Ensures that generation and consumption are balanced in the accounts.

A software provider does not have to trade itself, but can work with a licensed trader or energy supplier. This keeps the regulatory hurdle low, while the partner handles market access and settlement.

Which type of trading is suitable for behind-the-meter (BTM) storage?

BTM storage sits behind the meter of a company and serves primarily internal purposes – such as peak shaving, self-consumption optimization or backup.

In many cases, direct physical trading via the grid connection point is not intended, because:

feeding into the public grid is regulatorily complex,
storage is used primarily for local processes.

Nevertheless, a BTM storage system can participate physically in the electricity market if the applications are clearly separated from one another – both in time and in the accounts.

Example combination:

Winter / autumn: The storage is used for atypical grid usage or peak shaving – with a focus on operational cost savings.
Spring / summer: As self-consumption falls, free capacity can be used to actively sell power on the market via an energy supplier or direct marketer (e.g. the intraday or balancing energy market).

This creates a hybrid model in which the storage generates both local and market-based revenues.

Suitable models for BTM storage

Virtual trading via a VPP:
The storage operator provides its flexibility virtually, without having to trade itself. If the storage happens to be empty, the VPP can discharge another storage system in the portfolio.
Physical trading with clearly separated use:
In defined periods (e.g. seasonal or by time of day), the storage can actively feed in power and participate physically in the market.

How Lumera can bring your storage into direct marketing

Local optimization:
- The software optimizes charging and discharging profiles based on local electricity prices, load profiles and PV generation.
- Goal: minimize energy costs, reduce load peaks, increase the self-consumption rate.
VPP integration:
- Real-time transmission of SoC, power and flexibility to the VPP operator.
- The VPP decides centrally whether and when the storage becomes part of a market action.
- When needed, other storage systems in the network can step in if an individual storage system is currently unavailable.

This creates a hybrid model: the storage delivers local benefit – and, via the VPP, system-serving and economic flexibility at the same time.

Conclusion

Battery storage systems are long since more than just energy stores: they are active participants in the electricity market. This opens up a new field for storage manufacturers, installers, suppliers and industrial companies.

Whether physical or virtual – with intelligent optimization and integration into a Virtual Power Plant, both local and market-oriented revenues can be realized.