Physical and virtual trading at C&I battery storage
Nov 14, 2025
The energy market is becoming increasingly decentralized. In addition to traditional large power plants, industrial battery storage, photovoltaic systems, and flexible consumers are now playing a central role. But how can such decentralized systems participate economically in the energy market? 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 the buying and selling of electrical energy on the electricity markets. Traders buy and sell electricity to take advantage of price differences between markets or time periods – similar to trading on the stock exchange.
In Germany, there are various trading venues:
Day-Ahead Market (EPEX Spot) – Trading of electricity for the next day, hour by hour.
Intraday Market – Short-term trading up to a few minutes before delivery to balance deviations between forecasts and actual generation/consumption.
Balancing Area and Regulation Energy Market – This is about stabilizing the power grid in real-time.
Trading thus serves two functions: It enables economic optimization while also ensuring that generation and consumption remain balanced at all times.
Physical vs. Virtual Trading
Physical Trading
In physical trading, electricity is actually delivered or consumed – i.e., it is “physically” fed into or withdrawn from the power grid.
Example: An operator of a battery storage system sells 1 MWh of electricity on the Day-Ahead Market and discharges its storage at the agreed time.
Prerequisite: The participant has access to the grid, technical plant control, and is part of a balancing area.
Virtual Trading
Virtual trading means that although trading occurs on real electricity markets (e.g., on the Day-Ahead or Intraday market), there is no physical delivery.
This means: The trader closes their position in a timely manner before the delivery time – thus, no electricity is fed in or withdrawn.
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 electricity flows.
This principle allows one to profit from price differences without operating their own facility.
Thus, virtual trading is part of the spot market, but without physical activity.
Can you trade virtually without owning facilities?
Yes – at least theoretically. A virtual trader can trade in the spot market without having physical assets, as long as they close all open positions in a timely manner.
In practice, however, there are two important prerequisites:
Market Access:
The spot market (e.g., EPEX Spot) is regulated. Only participants with a balancing area or through a balancing area responsible party (BRP) may trade there.
This means: Even if one does not own a facility, they need a partner who could deliver physically if a transaction is not settled in time.
Regulatory Responsibility:
Virtual traders must ensure that their trading does not disrupt the physical balance in the power grid.
This responsibility rests with balancing area responsible parties, who oversee all feed-ins and withdrawals like accountants.
In practice, this means:
A trader can trade virtually, even without owning facilities.
A VPP operator or software provider needs access to real assets to provide physical flexibility when necessary.
Thus, a tiered system emerges:
Financial traders operate purely virtually.
VPPs operate virtually, but based on physical assets that they can actually deploy when needed.
Why must the system always remain balanced?
Technically, it is crucial that at any given moment, exactly as much electricity is fed into the grid as is withdrawn.
This balance is ensured by the so-called balancing area system.
Every electricity producer and consumer in Germany is assigned to a balancing area – a virtual energy account managed by a balancing area responsible party (BRP).
The BRP is essentially the “accountant” of energy flows:
It ensures that planned feed-ins and withdrawals are balanced.
If deviations occur (e.g., less sun than forecasted), the BRP must balance this by purchasing regulation energy.
This keeps the grid stable and avoids frequency deviations.
What is a Virtual Power Plant (VPP)?
A VPP (Virtual Power Plant) aggregates many decentralized energy systems – such as battery storage, PV systems, or flexible consumers – into a common, controllable portfolio.
The VPP has three tasks:
Aggregation: All assets are digitally connected, and their available capacity is determined.
Optimization: Which systems deliver or store electricity when is decided centrally.
Marketing: The VPP acts as a market participant and can trade energy on the exchange or offer regulation energy.
This allows even smaller systems, which would not have market access individually, to participate together in the energy market.
Key Stakeholders at a Glance
Battery Operators / Plant Operators: Provide flexibility (charging, discharging).
Software Providers / VPP Operators: Optimize operations and control the systems.
Energy Suppliers / Traders: Trade energy on the markets and bear the market risk.
Balancing Area Responsible Party (BRP): Ensures that generation and consumption are balanced financially.
A software provider does not have to trade themselves, but can collaborate with a licensed trader or energy supplier. This keeps the regulatory hurdle low while the partner takes care of market access and accounting.
What type of trading is suitable for Behind-the-Meter (BTM) storage?
BTM storage stands behind the meter of a company and primarily serves internal purposes – such as peak shaving, self-consumption optimization, or backup.
In many cases, direct physical trading via the grid connection point is not provided, as:
Feeding into the public grid is regulatory cumbersome,
Storage is primarily used for local processes.
Nevertheless, a BTM storage system can participate physically in the electricity market, if the applications are clearly separated – both temporally and financially.
Exemplary Combination:
Winter / Autumn: The storage is used for atypical grid usage or peak shaving – focusing on cost savings in operation.
Spring / Summer: With decreasing self-consumption, free capacity can be used to actively sell electricity on the market through an energy supplier or direct marketer (e.g., intraday or regulation energy market).
This creates a hybrid model, in which the storage both generates local and market-based revenues.
Suitable Models for BTM Storage
Virtual Trading via a VPP:
The storage operator provides their flexibility virtually without having to trade themselves. The VPP can discharge another storage in the portfolio if the storage is currently empty.
Physical Trading with clearly separated usage:
In defined time periods (e.g., seasonally or time of day), the storage can actively feed in electricity and participate physically in the market.
How Lumera Can Bring Your Storage to Direct Marketing
Local Optimization:
Software optimizes charge and discharge profiles based on local electricity prices, load profiles, and PV generation.
Goal: Minimization of energy costs, reduction of load peaks, higher self-consumption rate.
VPP Integration:
Real-time transmission of SOC, performance, and flexibility to the VPP operator.
The VPP centrally decides whether and when the storage becomes part of a market action.
Other storages in the network can step in if a single storage is currently unavailable.
This creates a hybrid model: The storage provides local benefits – and at the same time, through the VPP, system-serving and economic flexibility.
Conclusion
Battery storage systems are much more than just energy storage: 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.
