EEX Group – developing liquid markets with growing ...eneken.ieej.or.jp/data/8670.pdfEEX Group –...

EEX Group – developing liquid markets with growing renewables share

Steffen Riediger | シュテフェン・リーディガー Director Power Derivatives

IEEJ：October 2019 © IEEJ2019

Agenda

EEX Group – the global commodity exchange group

EEX Group’s services for a market based integration of renewables

Current trends in Europe - short-term trading and long-term hedging

Status of the Japanese power market from EEX’s perspective

EEX Japanese Power Futures: product overview

EEX in Japan – building a transparent and secure long-term market

Conclusion & Next Steps

July 2019 3

North America

Asia-Pacific

Europe

We are a Global Commodity Exchange Group

July 2019 4

North America

Asia-Pacific

Europe

EEX Group – Global Position

#1 in Power

Trading Worldwide

#2 in Emissions Trading

Worldwide

#3 in Natural Gas Trading

Worldwide Confidential © EEX AG, 2019

#1 in Power

Trading Worldwide

#2 in Emissions Trading

Worldwide

#3 in Natural Gas Trading

Worldwide

REGISTRY SERVICES

POWER SPOT

POWER DERIVATIVES

NATURAL GAS

ENVIRONMENTAL MARKETS

AGRICULTURAL MARKETS

GLOBAL COMMODITIES

MARKET DATA SERVICES MARKETS AND

SERVICES CLEARING SERVICES

Confidential © EEX AG, 2019

EEX – the home of power trading worldwide

Coverage in 2019

Coverage in 2000

EEX Performance in Power Derivatives A proven track record…

7

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (mid Sep)

TWh


Agenda








PLANNED PRODUCTION AND

CONSUMPTION

FLEXIBILITY

DAY-AHEAD AUCTION

INTRADAY CONTINUOUS

One day before delivery

Until 5 mins before delivery

HEDGING

FUTURES MARKET

Years / Months / Weeks before

delivery

EEX Group operates markets along the whole chain of power trading

9

Integrated & Secure Clearing Solution

2019 - EPEX SPOT – All rights reserved

•  integration of renewables into the exchange spot market strengthens the reference price signal of exchanges

•  studies show that direct marketers align their feed-in behaviour with the market price, particularly in times of negative prices

The pivotal role of EPEX Spot for the market-based integration of renewable energy sources

10

0

10

20

30

40

50

60

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Windenergy Photovoltaic

German energy market Installed capacities of wind and solar (in GW)

Source: REN21 (2019) 2019 - EPEX SPOT – All rights reserved

•  100% wind offshore

•  95% wind onshore

•  25% photovoltaic

Thereof marketed under direct marketing mechanism (July 2019)

Agenda








Drivers for the growth of intraday markets

12

Handle generation ramps with finer granularity products

Generation

Hourly products profile

15min products profile

Balance forecast errors

Day-ahead forecast

Intraday forecast

Real Feed-in

Today, with an increased share of renewables in the emarket, new reasons for

intraday trading emerge:

2019 - EPEX SPOT – All rights reserved

Growing share of renewables requires markets to trade closer until delivery

July 2019 Confidential © EEX AG, 2019 13

Lead-time down to 45 min

API for Intraday

and Day-Ahead

Lead-time down to 30 min

Lead-time down to

5 min

2011 2017 2012 2015

Lead-time down to

5 min

2018

Volumes in intraday markets of EPEX SPOT

18.09.19 © 2019 14

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

DE DE 15 AUCT FR GB NL BE CH AT TWh

Power Purchase Agreements (PPAs) A key instrument for investments in renewables

15

Power Purchase Agreement (PPA) Long term contract between a party generating and selling electricity and a party purchasing electricity. Have existed for decades.

Corporate PPA Corporate PPAs enable businesses to source electricity from generators at an agreed price, while giving producers a reliable, guaranteed buyer at a stable price.

© EEX AG, 2019

Renewable PPAs Electricity traded between the two parties comes from a Renewable Energy power plant. PPAs are often necessary in order to secure financing from a bank for new renewable energy projects. Purchasers can be utilities or corporates, often attracted by ‘green credentials’ in having their power supply come from 100% renewable sources. RE PPAs are often fixed for long periods, up to 15 years, to ensure revenue security for the developer.

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Long-term hedging of renewable energy assets with financial power futures

16

Old hedging horizon

New hedging demand for renewable energy financing

Market participants in Europe are increasingly using financial power futures in order to help secure financing from banks for new assets and/or manage long-term price risks.

Following requests from the industry, EEX is currently working to extend it’s product range by listing financially settled Power Futures for up to 10 years in advance.

Currently available EEX Financial Power Futures

© EEX AG, 2019

Agenda








Japan Power Market Framework § Electricity consumption 1,020 TWh/year

§ 4th largest power market in the world

§ 10 zones

§ 2 frequency levels (60 Hz / 50 Hz)

18

Tokyo

Osaka


Japan Power JEPX spot auction – average daily volume

Confidential © EEX AG, 2019 19 Source: Article “Power Futures Seen as the Future of Faded Commodity Exchange”, Bloomberg 2019

in million kW

h

900

800

700

600

500

400

300

200

100

0

Agenda








21

Connecting the Japanese Power Community


Japanese

utilities

Japanese independent

retail suppliers

EEX network of trading participants,

brokers and market access providers

ECC clearing banks

Developing an OTC-cleared market for Japan

22

§  Combining the current trading paradigm (OTC bilateral) in the Japanese market with the security and transparency of a cleared venue

§  Cash-settled power futures are the ideal trading and hedging instrument for financial and physical players

§  Transactions will be arranged by brokers and are subsequently registered at EEX

§  No central orderbook for Japanese power at EEX

§  METI confirmed that EEX can provide a clearing service for Japanese Power Futures under the Japanese Commodity Derivatives Act


Broker

Trading Participants

Clearing assures the proper fulfilment of each contract concluded or registered at EEX

The concept of clearing

23

After a trade has been concluded, it will be cleared by ECC. In doing so, ECC serves as the

contractual partner for both buyer and seller.

ECC ensures the fulfilment of each trade and mitigates the counterparty risk.

Benefits of clearing

•  Transparency

•  Reliability

•  Security (Risk Mitigation)

July 2019 Confidential © EEX AG, 2019

Agenda








25

Kansai Area

Product Specifications: Currency: Japanese Yen Pricing: in Yen/kWh

Minimum price fluctuation: Yen 0.01 per kWh Contract Size: 1 MW (1,000kW) x number of hours

in delivery period Minimum lotsize: 1 contract

Week Base / Peak

up to 5 weeks

Month Base / Peak

up to 7 Months

Quarter Base / Peak

up to 7 Quarters

Season Base / Peak

up to 4 Seasons

Years Base / Peak

up to 6 Years

Tokyo Area

EEX Japan Power Futures - Product Details

•  Peak definition: int. standard, Mo-Fr 08:00am – 08:00pm

•  Existing EEX trading calendar


Agenda








EEX Japanese Power Futures Bringing best-practices from Germany to Japan

27

§  Proven track record in building liquid power markets

§  European power markets are perfect blue-print for Japan

§  Well-established clearing model with global distribution

§  Local presence in Japan


EEX Japanese Power Futures Next Steps

28

§  Product Launch: Q1/Q2 2020

§  Series of webinars in cooperation with Bloomberg

§  Numerous stakeholder meetings and seminars in Japan

§  Dedicated workshops in Tokyo and Singapore in Q4 2019


Thank you

シュテフェン・リーディガー

Steffen Riediger Director, European Power Derivatives

[email protected]

Contact :[email protected]

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