I understand that implied volatility is the expected volatility of an underlying contract in the Black option pricing model. This is easy to interpret for assets delivered at a point in time. But how about those delivered over a period of time, such as power? Is the IV the expected volatility of the monthly average price, for a monthly options contract, or of the daily price within that averaging timeframe?
It depends on what you consider your underlying to be.
If you consider the underlying to be the thing which is being averaged, then you need to make sure that you're calculating the average price option on the underlying.
If you consider the underlying to be the "average price of the underlying over the relevant period" then you can just calc the implied vol of the option on this underlying.