RECS Market Meeting 2014 - Presentation EEX Steffen Riediger

Copyright 2014 – All rights reserved

Steffen Riediger – Senior Expert Product Development & Projects

Introducing GOs in the European Commodity Market


Contents

1. EEX Group – a brief overview

2. Current characteristics of GO trading

3. Standardization of GO trading and introduction of exchange-

traded futures at EEX

4. Perspectives on the future development of the GO market


• The European Energy Exchange (EEX) develops, operates and connects secure, liquid and transparent markets for energy and related products.

• EEX holds 50 percent of the shares in the Paris-based EPEX SPOT SEwhich operates the Spot Market for power for delivery in Germany, France, Austria and Switzerland.

• German and French power derivatives trading is concentrated withinEEX Power Derivatives GmbH, a majority-owned EEX subsidiary basedin Leipzig.

• Furthermore, EEX organises trading markets for natural gas, CO2 emission allowances, coal and Guarantees of Origin.

• Clearing and settlement of all transactions is done by European Commodity Clearing AG (ECC), the clearing house of EEX and its partner exchanges.

EEX at a glance


Spot Market Derivatives MarketTrade Registration

for Clearing

Fully integrated clearing and cross-margining via ECC

Power (EPEX SPOT)Day ahead auction (D/A, F, CH)Intra-Day (D/A, F)

PowerPhelix-FuturesFrench/Dutch/Belgium FuturesOptions on Phelix-Futures

PowerCorresponding productsPower Futures for Italy, Spain, Switzerland,Scandinavia and Romania

Natural GasDay ahead and Within-day(NCG, GASPOOL, TTF)

Emission AllowancesSecondary Market for EUA and CER spot contractsEUA Primary Auction Spot

Guarantees of OriginNordic HydroAlpine HydroCentral Northern Europe Wind

Natural GasPhysical Futures(NCG, GASPOOL)

Emission AllowancesSecondary Market for EUA,EUAA, CER and ERU FuturesEUA Primary Market Derivatives

CoalFinancial Coal Futures (ARA, RB)

Natural Gas

Corresponding productsNBP Gas Futures

Emission Allowances

Corresponding products

Guarantees of OriginCorresponding products

CoalCorresponding productsEuro-denominated futures (ARA,RB)

EEX Overview: Markets and Products


Contents







Current characteristics of GO trading -What is a GO supposed to be?

Guarantees of origin issued for the purpose of this Direc tive have the sole function of proving to a final customer that a given share or quantity of energy was produced from renewable sources. A guarantee of origin can be trans ferred, independently of the energy to which it relates, from one holder to another.

Directive 2009/28/EC, fig 52


Increasing number of labels

Current characteristics of GO trading -How does GO trading look like today

Intransparent, bilateral trading

What is the fair price for a GO on wholesale level today?

Fragmented market (by region, technology, plant age etc)

Different disclosure rules on national level

Emergence of new business models, e.g. ECOHZ GO2

Connection of GO and physical power delivery


Contents







Standardization of GO trading – EEX efforts to introduce GOs as commodities

There is a demand for a transparent and trusted GO price on wholesale level. EEX wants to shape the GO wholesale market by offering standardized GO

futures with commonly accepted reference prices.

A parallel can be drawn to the Carbon market - another book and claim mechanism - which is standardized, liquid and transparent. Trusted reference prices are established at exchanges (EEX and ICE).

In 2012 and 2013 EEX conducted a survey among 40+ clients to identify a common product specification for exchange-traded GO futures.

The feedback and the clients requests ranged from „one-fits-all“ to „as diverse as possible“.


Standardization of GO trading -Bundling by region and technology

Nordic Hydro

Alpine Hydro

Continental Europe Wind


Standardization of GO Trading - GO Futures listed at EEX

GO Futures Nordic Hydro Power

GO Futures Alpine Hydro Power

GO Futures Continental Europe Wind

Power

Tradable maturities

December (up to 3 years ahead)

March (up to 3 years ahead)

Valid production period

December expiry: January – December of current calendar yearMarch expiry: April – December of previous calendar year

Public Support Code 0 – no support Code 0 – no support Code 0, 1, 2, 3 or 4

Contract Volume 1.000 GO’s

Tick Size Three decimal digits after the point; this corresponds to € 0.001 per GO.

Minimum Price Change

1,00 € per contract

Trading model Continuous trading with shortened trading hours (currently every Thursday 1:00pm – 4:00pm)

Fulfilment Delivery of GO’s via ECC account at Grexel Finland upon expiry

EEX is setting a new market standard for GO trading by grouping countries, production periods and expiries to standardized products.


Trading volumes of EEX GO Futures

As of 28 February 2014


Contents







250 TWh were traded in 2013, the market is still growing and mature enough to be standardized

Change in national disclosure rules – Will Norway keep selling its hydro GOs to Continental Europe in the future? Will we see a monthly disclosure cycle in the future?

Aland court case – will there be a fundamental change in national support regimes?

More countries joining the AIB hub – will we see even lower prices with more GO volumes coming to the market?

Discussion on using GOs for all energy sources (CEER, UBA…)

Market development perspectives


EEX GO improvements in 2014

As of February, 12 members are admitted to the EEX GO market. Additional members are currently in admission process.

EEX has introduced a new membership type “Environmental Markets” that allows trading of GO Futures for an annual fee of 2.500 EUR only. The first year of membership is free of charge.

On the background of the significant drop of market prices, EEX wants to support market participants by waiving the trading fees until end of 2014. Trading participants will only have to pay clearing fees of 0.0025 EUR/MWh

EEX is committed to develop a liquid and transparent wholesale market for Guarantees of Origin.


Thank you for your attention.

RECS Market Meeting 2014 - Presentation EEX Steffen Riediger

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Transcript of RECS Market Meeting 2014 - Presentation EEX Steffen Riediger