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UK firms launch first physical hedging market for renewable energy suppliers
4/3/2026
News
Two UK-based energy technology companies, Tem and Electron, have launched what they claim is the country’s first physical hedging market aimed at helping renewable energy suppliers manage imbalance risk using real-time support from flexible energy assets.
As renewable energy becomes the UK’s largest source of electricity and offshore wind capacity continues to grow, suppliers face increasing exposure to imbalance volatility when forecast supply does not match actual generation. Currently, most renewable suppliers rely on financial hedges in the wholesale market to manage imbalance risk through price exposure. However, these hedges often take effect during periods of high electricity prices, potentially leading to higher costs for customers.
The new physical hedging market allows Tem to reserve flexible capacity in advance from distributed energy assets such as battery storage. This reserved capacity can then be called upon when forecasts diverge from real-time conditions, rather than being triggered when a financial hedge has its highest value. The model is intended to lower hedging costs for Tem while providing additional revenue streams for existing infrastructure, without disrupting the assets’ daily trading operations.
Under this approach, participating asset operators receive annual reservation payments for committing a portion of capacity, along with utilisation payments when the capacity is deployed. These payments are designed to complement existing market mechanisms, including the capacity market, ancillary services and wholesale trading.
The new market will be hosted on ElectronConnect, Electron’s flexibility market platform. It will manage onboarding, contracting, dispatch and settlement, and allows Tem to issue day-ahead signals so assets can continue to participate in other markets when not required.
