Electricity market

Electricity trading is defined as the activity of a company, electric energy on the wholesale market to buy and sell. Be distinguished from electricity trading is the sales activity in the retail market where products for consumers, mostly in full supply contract with power usage and schedule management, are deducted.

Before the liberalization of the power supply to the output of the power plants has been done by the supplier to customers in its territory monopoly ( = purchase obligation ). The costs of production have been passed on to the customer, price and volume risks for the producers were low.

Since the liberalization of the electricity market the producer is now exposed to volume and price risks. About the electricity market (see also Power Exchange ), the producer may attempt to hedge these risks ( hedging transactions ).

Derivatives

At the so-called derivatives, is traded on the power for the next few years, a producer can produce its future power plants sell at a known price today, thus ensuring its gross margin. The distribution of electricity supplier can buy the quantities needed for its customers on the futures market in advance at a fixed price and not disclose plus its margin to its customers. Even large consumers (eg industrial companies ) can purchase electricity at fixed prices directly on the futures.

In addition to the trading participants who are interested as producers or distributors / consumers to their physical location, there are speculative participants, often banks. If such an early stage more power plant capacity is offered to the market, is in demand as at this time of the distributors, buy speculative participants this energy and keep this as a speculative position until the market demand is present, they hope, of course, sell them more expensive to can as they have shopped them.

For a functioning futures market high liquidity is necessary. In the German electricity market more than six times the power consumption is handled in the futures market. An important trading center for Germany is the European Energy Exchange EEX. Together with the Scandinavian electricity market and the Netherlands, Germany thus forms a region with very active trade in electricity.

Spot Market

While the derivatives used to hedge long-term production and demand, the spot market is used to optimize the production or Absatz-/Verbrauchsportfolio for in most cases next day.

For example, if a power plant has its generation capacity not sold forward, so his power on the spot market is offered for sale. The bid is made to short-run marginal costs, including in particular the cost of fuel ( including additional costs such as transport ), the value of the required emission allowances and other variable costs (eg for wear) count. Only if at least these costs are generated, the sale is worth on the market. The fixed costs play for this short-term production decision, however, does not matter.

If on the other hand, a power plant 's production already sold forward, so it takes still participate in the spot market: Namely, it can be rewarding, the " sold " to disable power plant if the power can be produced by another actor at a lower cost in the market. To achieve this, a purchase offer to the short-run marginal cost of the power plant is set in the market.

Trading on the futures market and spot market thus serves to minimize risks to producers and consumers in the liberalized market and still achieve a minimum cost in the overall system operation of the power plant.

Trading takes place both at power exchanges as well as to other market places outside (so-called OTC trading, which are usually electronic trading platforms from brokers ) instead.

Intraday market

In the short-term intraday market transactions are carried out in order to respond, for example, variations in the load of the forecast or outages of power plants can and reduce the schedule deviation by the end of the day-ahead trading yet. The European Energy Exchange EEX allows intraday transactions for up to 45 minutes prior to delivery. In OTC trading can at power plant outages - rule across zones - up to 15 shops min be made before commencement of delivery. Internal control area may derogate from load forecast and be compensated until the next business day at 16:00 clock.

Balancing energy market

Transmission system operators need to constantly balance the current account primary control reserve, secondary control and minutes reserve reserve. You are in Germany obliged to procure a joint call in the balancing energy market.

Negative electricity prices

Negative electricity prices form at the power exchange when a high supply of low demand facing. The combination of high wind power production in conjunction with inflexible conventional power plants ( in particular brown coal and nuclear power plants) partially resulting in low demand at negative prices for the German market in spot trading of the European Energy Exchange. This means that the decrease of electrical energy and the thermal conversion into heat or store the excess energy was rewarded (eg in pumped storage power plants ). In the first half of 2013 came in 36 hours negative current prices ( 4380 hours total ). In these hours 778 GWh of electrical energy were exported, including 176 GWh at negative prices. The value of the total traded electricity with negative prices stood at minus 12.6 million euros. The export current had a value of minus 2.2 million euros.