By John Knorring
CEO, Green Tiger Markets

The Solar Surge and the Duck Curve

As we wrote in our recent article, When the Sun Comes Out: How Renewables Are Reshaping Intraday Energy Prices in the Philippines, solar power has surged in the Philippines, casting a brilliant midday glow but also creating an unexpected challenge for energy market participants. With solar installations proliferating, the country now faces the “dove curve” on its way to the classic “duck curve”—a deep midday dip in electricity prices followed by a sharp rise as the sun sets. This daily rhythm is reshaping market dynamics, challenging traditional generators, grid operators, and energy consumers alike. Yet simple financial hedging tools offer a potent solution to smooth out these disruptive price swings.

Challenges of Solar Power Volatility

As solar capacity grows, midday generation often exceeds demand, depressing wholesale electricity prices. Conversely, as solar power fades in the evening, conventional generators must rapidly ramp up output to meet surging demand, pushing prices sharply upwards. This pronounced price volatility poses significant financial risks, particularly for thermal generators facing higher operational stress and increased maintenance costs due to frequent ramping.

Financial Hedging Instruments

Financial hedging instruments, such as contracts for differences (CFDs), forward contracts and options, provide a strategic buffer against this volatility. By entering into contracts tied to future electricity prices, generators and buyers can lock in predictable costs and revenues. Forward contracts allow parties to agree on a fixed price for energy at a future date, insulating them from price swings. 

For instance, a solar power producer facing lower midday revenues might enter into a CFD agreement to swap its variable midday spot prices for stable fixed payments. Conversely, a Distribution Utility could use CFDs to mitigate higher evening costs by exchanging volatile spot prices for stable ones, thus reducing financial uncertainty.

Options, meanwhile, give buyers or sellers the right, but not the obligation, to purchase or sell power at a predetermined price, thus offering flexibility and protection against adverse market movements.

Complementary Physical Solutions

Of course, hedging is not the only strategy to navigate the duck curve’s challenges. Market participants can also deploy physical solutions such as energy storage systems, like batteries or pumped hydro storage, to absorb midday solar surplus and release it during peak evening demand. Demand-response measures, encouraging consumers to shift usage to lower-priced periods, also complement financial instruments effectively. 

In time, batteries will get cheaper. Smart meters will let households and businesses respond to price signals in real time. Aggregators will bundle rooftop solar, behind-the-meter batteries, and EV chargers into dispatchable “virtual power plants”. These solutions seem to be on the horizon in the Philippines, but will take time to develop.

Advantages of Financial Hedging

Financial hedging offers unmatched immediacy and scalability, enabling quicker adaptation than physical infrastructure investments. In markets with deep liquidity and regulatory support for forward trading, financial hedges swiftly provide participants with reliable protection against market swings induced by solar proliferation.  

As Philippines energy companies engage more actively with financial hedging tools, a virtuous cycle of greater transparency and better pricing will begin to develop, providing more solutions to more companies. Hedging Products such as those on the Green Tiger Markets platform provide much-needed price transparency, market liquidity, and standardisation. Using these risk management instruments today will not only reduce financial volatility but also support further investment in renewables by providing greater revenue certainty. With the right tools, even the steepest duck curve can become a gentle glide into a brighter energy future.

Staying ahead of the curve

As the Philippines grapples with the impact of growing solar supply, embracing financial hedging tools will ensure a smoother transition to the new renewable energy economy for both generators and consumers. Harnessing the sunlight is only half the story – hedging its shadows is how the Philippines will truly prosper.

About the Author

John Knorring is the founder and CEO of Green Tiger Markets, the first and only provider of a forward marketplace for the Philippines energy industry. He has over 25 years experience in forward hedging markets. He is a believer in the power of markets and a proponent of transparency and price discovery. John, a Chicago native, is a resident of Austin, Texas.