Day-ahead electricity markets continue growth trend across Europe

Most of Europe’s Day-ahead power markets recorded yearly increases in traded volumes in July, according to data collected by ICIS.

The data reflects a general shift in volumes from the forward curve to the prompt, a longer-term trend driven by a number of factors including the rise in unpredictable renewable generation and curve backwardation.

Exchange-based platforms continued to record a larger share of short-term market activity compared with the over-the-counter (OTC) market, although on the forward curve the reverse remained the case.

A similar pattern was also evident in July last year.

The largest volumes went through on the combined Germany and Austria day-ahead platform run by exchange EPEX Spot, with a total of 20.7TWh, a 3.7% decline year on year.

However despite seeing more volume than the brokered day-ahead market, the gap between the two closed, as OTC day-ahead volumes, which included baseload, peaks and offpeaks transactions, stood at 4.2TWh, a 24% increase year on year.

The next largest volumes were seen on the UK power market. A total of 10.7TWh went through on the N2EX day-ahead auction, a 3% decline year on year.

The Power UK market run by APX registered total volume of 1.97TWh, up 5.9% year on year, which included both traded and cleared volume.

On the OTC market, day-ahead volumes came in at 3.1TWh, a 7.5% decline year on year.

At the other end of the scale were Czech volumes with data via electricity and gas market operator OTE showing 1.1TWh was traded on the exchange in July, an 11% increase year on year, while OTC volumes reported to ICIS were 0.1TWh, an 18% decline.

Prompt growth

The data suggests although both exchange and OTC volumes have mostly recorded year-on-year increases, it is the OTC markets that tend to make the larger percentage gains. That said, exchange activity on day-ahead markets is larger than on OTC.

The largest yearly increase in exchange volumes was on the EPEX Spot French market, which saw a 37% increase to 6TWh.

Nearly all exchange volumes recorded yearly increases with the exception of platforms covering Germany-Austria, Switzerland, Netherlands and the UK. The largest declines were on the Swiss market, with volumes falling 11% to 1.7TWh.

One trader suggested last year that political pressure also played a part in increased prompt volumes: “With the government shouting for the utilities to react to every fall in the market price, you have to leave yourself unhedged to be able to do this.

“This means the utilities have moved away from three-year hedging windows, probably to eighteen months tops,” he explained ( see EDEM 16 August 2013 ).

OTC activity shows the largest increase in volumes was seen in the Belgian market which nearly tripled to 0.1TWh. As with movements on exchanges, nearly all volumes revealed yearly increases except for Netherlands, Poland, UK and the Czech Republic.

The largest decline was on the Dutch market, with volumes falling 86% to 0.03TWh.

Data from trading systems provider Trayport shows a decline in volumes across Europe. Broker bilateral, broker cleared and exchange executed volumes combined show that in the year to July a total of 4.8TWh was transacted, down from 5.3TWh, although exchange data does not include spot volumes.

Broker bilateral activity, volumes executed by brokers and cleared bilaterally without the use of a clearinghouse, dominated with 64%, down from the previous year’s 70%. Christopher Rene