Energy Markets

In the European Union, the market for Energy is open to many supplies and many consumer. The design of a commodity market is enabling the trade and the supply of energy with special products and rule of trading.

Energy markets are cross border markets in the free flow of energy between different conterparts of a trade for anonymous trading in and settlement of standardised power products. The opening of the European Energy markets went into place in late 90s is now defining the value of Energy by the virtual negotiation of buy and sell – of demand and supply.

 

Market Liberalization and Regulation

Open and free markets (liberalization) are requiring a fundamental market regulation. The virtual counterparts for buy and sell will probably never meet physically – both parties have to rely on the given rules and mechanism of the regulated market.

In Europe, each European country with liberalized and opend Energy markets is having a national Regulatory Authority.

 

 

Energy Spot Market

The spot market for Energy is trading on very short-term for the day and the day-ahead.

Spot market is required to adapt the physical consumption (or production) to the long-term contracted energy volume for the present day and the next day (day-ahead). Market participants need the spot market for the portfolio optimization.

Industrial companies are also using the sport market for the overall portfolio management and optimization. The application of Energy Exchange spot market is requiring a certain minimum consumption volume before it will pay off.

  • For larger industrial companies (with intensive Energy consumption), the usage of spot market mechanism is case by case useful.
  • For SME companies (with smaller Energy consumption), the procurement of Futures is more reasonable.

Energy Futures Market

The futures market for Energy is trading various products for the “future”. Buy and sell of futures are handled in the quantity of 1 MW for different Energy products:

  • Daily Products for on specific day in the future
  • Weekly Products
  • Monthly Products for on specific month in the future
  • Quartlerly Products for one quarter in the future
  • Yearly Products for one calendar year in the future

The load profile of Energy consumption is splitted into two different product groups on futures market:

  • Base Load without variation over the days
  • Peak Load covering the variation of the load profile over the day

The procurement of Futures is the typical Energy procurement Portfolio for industrial / economical clients.