A spot market contract is an agreement to buy or sell a clearly defined amount of a certain good which is traded for immediate delivery at a specific price.
Delivery place (control area), amount and time are agreed upon when business transaction is concluded. The amount to be delivered and the price are decided upon individually every time a business transaction is finalized.
The trading of a spot contract is an agreement between two parties which have an obligation to deliver or use a certain amount of electricity to each other. Spot market contracts can be concluded on an exchange and on an OTC market. These contracts are traded with a specified delivery time such as a certain hour or multiple hours as a block contract. There are general types of block contracts.
The general block contracts are base load und peak load contracts. A base load contract is the continuous delivery 24 hours a day and every day during the delivery period (including public holidays). Peak load is the delivery of electricity at a continuous power level for 12 hours from 08:00 until 20:00 from Monday to Friday including public holidays.
Spot contracts are fulfilled when the electricity is delivered by the supplier or accepted by the buyer. The payment of a spot contract is generally done at the same time as the delivery. In energy sector the electricity purchased is paid for one exchange-trading day before it is delivered.
In spot trading you distinguish between the different markets according to the lead times when the electricity is meant to be delivered. In the day-ahead market contracts are swapped which have a delivery or acceptance date one day after the business transaction is done. In the intra-day market electricity can be traded 30 minutes before the delivery at a certain hour or quarterly-hour.
Prices are fixed in the spot market either through an auction or through continuous trading.
