futures products

Europe on alert, energy futures surging, concerns grow in north

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Intensifying fears of energy security dangers around Europe next winter are becoming apparent as energy futures continue skyrocketing to unimaginable levels.

Europe is now in a state of heightened alert as the continent’s north, better equipped with greater energy storage facilities, is showing clear signs of serious concern, which was not the case earlier this year, when members of the continent’s south, including Greece, were systematically underlining the dangers ahead at every EU summit.

EU energy ministers have lined up yet another extraordinary Council meeting for July 26 to seek solutions for the Russian-induced gas supply crisis anticipated for next winter.

Highlighting Europe’s growing concerns, French futures for the fourth quarter, the heart of winter, yesterday peaked at 1,000 euros per MWh.

The French government’s announcement of a plan to fully nationalize debt-laden energy giant EDF in order to help it ride out the European energy crisis and invest in atomic plants preceded this latest price surge. Half of EDF’s nuclear reactors are currently sidelined as a result of technical issues.

In Germany, futures for December, 2022 yesterday exceeded 455 euros per MWh, fueled by news that the country’s Ver.di trade union has asked the government to accelerate a rescue plan for the Uniper energy group. The company itself has ascertained that a lump-sum tax plan stands no chance of being imposed, adding that consumers will not be called upon to cover the cost of the energy group’s rescue plan.

In neighboring Austria, moves are being made to secure space at Haidach, one of Europe’s biggest storage facilities, as Russia’s Gazprom has not met rules requiring storage facilities to cover a minimum level.

 

 

 

Soaring Greek energy futures at European energy exchange

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Greek energy futures at the European energy exchange are on an upward trajectory from August onwards, as is the case with most European markets.

Greece’s energy futures for August ended yesterday’s trading session at 343 euros per MWh, while September futures were sold for 417 euros per MWh, taking the quantity ordered for the month to 926 GWh.

Greek energy futures for the fourth quarter of 2022 also rose, reaching 351 euros, following recent trends set by Germany and Italy, as well as Greece’s day-ahead market over the past month, which has risen from 260 euros to levels consistently over 300 euros.

Despite the high costs, the government is hoping its retail electricity market revisions can rekindle interest in futures.

In any case, developments in the wider electricity market due to the energy crisis have strengthened the reflexes of companies, pushing them towards safety moves through the acquisition of relevant products.

Market players fear European energy inaccuracies could lead to further woes

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Major energy market players agree European energy consumers could face many more rounds of pressure over the next few years as a result of errors and inaccuracies plaguing the EU’s energy transition plan towards renewables.

Energy market players are not doubting the EU’s decarbonization goal, seeing it as irreversible, but do believe the European Commission must rectify, as soon as possible, current mechanism faults and market distortions whose resulting deficiencies are being exploited by traders and monopolies, such as Russian gas giant Gazprom, earning excessive revenues at present.

Europe appears to have trapped itself in mechanisms that do not seem to be working, fueling rising concerns among enterprises and industrial players.

Measures must be taken right now at national and European levels. For instance, windfall profits, sparked by sharp wholesale price increases, need to be stopped through the introduction of related taxes, as has been the case in Spain, market players suggest.

Also, electricity prices need to cease reflecting the spot market’s surging prices and instead be shaped by the actual cost of the energy mix, comprised of low-cost renewables (30-35%), high-cost natural gas (30%), lignite (10%), hydropower (10%), plus imports.

In addition, green PPAs reflecting actual cost need to player a bigger role. In Germany, for example, 90 percent of electricity supply is currently made available through PPAs.

Fearing this crisis could last, industrial players in Greece are moving to secure futures contracts covering supply for the next three to four years.

 

Futures market launched in adverse conditions, PPC the market maker

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The energy exchange’s futures market begins operating today, far sooner than planned following considerable efforts from all agencies and authorities involved, but the launch comes at a time of adverse conditions.

Authorities, given the currently unfavorable abnormal market conditions, will be content to see this new platform operate without technical glitches. Trial runs ahead of today’s launch did not produce problems.

The current pressure felt by financial markets and electricity suppliers has reined in early expectations.

Power utility PPC will assume the crucial role of market maker, bringing in the embryonic market’s first futures products.

The early launch of the futures market was promoted by the energy ministry to help cover electricity supplier needs following the premature termination of NOME auctions.

Limit on target model electricity contracts, consultation soon

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An upper limit is expected to be imposed on the amount of electricity production companies will be entitled to negotiate for target model contracts, according to a decision by authorities to be forwarded for public consultation within the next few days.

The implementation of an upper limit restricting the amount of electricity a company is permitted to negotiate in the futures market is foreseen in the target model plan. The remainder of electricity will need to be channeled into the day-ahead market to ensure that necessary amounts are available.

For months now, officials have speculated about the level of the upper limit. A clearer picture is expected within the next few days, when terms are forwarded for consultation.

Power utility PPC and independent companies have offered differing views. PPC has insisted on an elevated maximum level, an opinion shared by industrial figures, including EVIKEN, the Association of Industrial Energy Consumers, who believe low-level limits would not enable them to establish contracts with PPC for electricity amounts fully covering their needs.

Authorities in rush for new futures product as NOME replacement

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Authorities and agencies, primarily Greece’s energy exchange, tasked with designing a futures product intended to replace the country’s NOME auctions, being abolished, are racing against a time limit imposed by the European Commission.

The introduction of a six-month product, to run from this coming January to June, is being considered, according to a recent update provided by the government to Brussels.

Preparations leading to the establishment of required platforms by the end of the year are being pushed ahead.

Various developments have shrunk the available time for the new product’s introduction by six months, placing all authorities involved under considerable time pressure.

The Greek energy exchange, aiming to start operating in February, is currently working closely will all other relevant agencies on various issues, including the delivery of a product to replace the NOME auctions.

The level of readiness of power utility PPC to assume the role of market maker of the new futures product is pivotal.