(Montel) European power futures trading volumes should see a recovery from last year’s slump, though they are unlikely to return to pre-crisis levels, Peter Reitz, CEO of the EEX exchange, told Montel in an interview.
“It will never be exactly the same again in terms of volumes for the futures but I do expect that the overall size of the market will certainly reach last year’s or pre-crisis levels and even go beyond,” he said on the sidelines of the E-World energy fair in Essen.
His comments came as European power futures volumes dived 27% year on year to 3,344 TWh in 2022 on the Leipzig-based power bourse, with liquidity tumbling on record-breaking prices due to a sharp cut in Russian gas supplies amid the war in Ukraine that led market participants to reduce their exposure.
Gradual recovery
However, the segment had slowly recovered in 2023 to date, Reitz said.
“The development started cautiously in January and February and has now gone up significantly in March, April and now also the first weeks in May.
“That is why I am also optimistic that we will see a growing electricity derivatives market in Europe this year,” he added.
The German market, for instance, grew 4% in the first four months of this year.
“In the times when there were large price swings… especially financial market participants, who did not have any physical assets, held back,” Reitz said but added they were now returning.
Short-term trading
The exchange was also benefitting from the shift to short-term trading, which was supported by more intermittent renewables in the system and the need for balancing power. Intraday-volumes on the spot exchange Epex Spot, which is 100% owned by EEX, jumped 30% in the January-April period, Reitz added.
“But we are also seeing, for example, a stronger automation of trading, where wind turbines in the North Sea are equipped with sensors which sends a signal that trades directly in our order book without anyone else being involved at all,” Reitz said.
“And to the extent that this automation, this digitalisation, is increasing, new trading volumes are also emerging, which we didn't see before.”
The EEX remains the dominant power exchange in Europe, accounting for 70% of all spot and financial trading volumes last year, Montel reported previously.
His comments came as European power futures volumes dived 27% year on year to 3,344 TWh in 2022 on the Leipzig-based power bourse, with liquidity tumbling on record-breaking prices due to a sharp cut in Russian gas supplies amid the war in Ukraine that led market participants to reduce their exposure.
Gradual recovery
However, the segment had slowly recovered in 2023 to date, Reitz said.
“The development started cautiously in January and February and has now gone up significantly in March, April and now also the first weeks in May.
“That is why I am also optimistic that we will see a growing electricity derivatives market in Europe this year,” he added.
The German market, for instance, grew 4% in the first four months of this year.
“In the times when there were large price swings… especially financial market participants, who did not have any physical assets, held back,” Reitz said but added they were now returning.
Short-term trading
The exchange was also benefitting from the shift to short-term trading, which was supported by more intermittent renewables in the system and the need for balancing power. Intraday-volumes on the spot exchange Epex Spot, which is 100% owned by EEX, jumped 30% in the January-April period, Reitz added.
“But we are also seeing, for example, a stronger automation of trading, where wind turbines in the North Sea are equipped with sensors which sends a signal that trades directly in our order book without anyone else being involved at all,” Reitz said.
“And to the extent that this automation, this digitalisation, is increasing, new trading volumes are also emerging, which we didn't see before.”
The EEX remains the dominant power exchange in Europe, accounting for 70% of all spot and financial trading volumes last year, Montel reported previously.
