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EEX Group – developing liquid markets with growing renewables share
Steffen Riediger | シュテフェン・リーディガー Director Power Derivatives
IEEJ:October 2019 © IEEJ2019
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
July 2019 3
North America
Asia-Pacific
Europe
We are a Global Commodity Exchange Group
July 2019 4
North America
Asia-Pacific
Europe
EEX Group – Global Position
#1 in Power
Trading Worldwide
#2 in Emissions Trading
Worldwide
#3 in Natural Gas Trading
Worldwide Confidential © EEX AG, 2019
#1 in Power
Trading Worldwide
#2 in Emissions Trading
Worldwide
#3 in Natural Gas Trading
Worldwide
REGISTRY SERVICES
POWER SPOT
POWER DERIVATIVES
NATURAL GAS
ENVIRONMENTAL MARKETS
AGRICULTURAL MARKETS
GLOBAL COMMODITIES
MARKET DATA SERVICES MARKETS AND
SERVICES CLEARING SERVICES
Confidential © EEX AG, 2019
EEX – the home of power trading worldwide
Coverage in 2019
Coverage in 2000
EEX Performance in Power Derivatives A proven track record…
7
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (mid Sep)
TWh
Confidential © EEX AG, 2019
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
PLANNED PRODUCTION AND
CONSUMPTION
FLEXIBILITY
DAY-AHEAD AUCTION
INTRADAY CONTINUOUS
One day before delivery
Until 5 mins before delivery
HEDGING
FUTURES MARKET
Years / Months / Weeks before
delivery
EEX Group operates markets along the whole chain of power trading
9
Integrated & Secure Clearing Solution
2019 - EPEX SPOT – All rights reserved
• integration of renewables into the exchange spot market strengthens the reference price signal of exchanges
• studies show that direct marketers align their feed-in behaviour with the market price, particularly in times of negative prices
The pivotal role of EPEX Spot for the market-based integration of renewable energy sources
10
0
10
20
30
40
50
60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Windenergy Photovoltaic
German energy market Installed capacities of wind and solar (in GW)
Source: REN21 (2019) 2019 - EPEX SPOT – All rights reserved
• 100% wind offshore
• 95% wind onshore
• 25% photovoltaic
Thereof marketed under direct marketing mechanism (July 2019)
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
Drivers for the growth of intraday markets
12
Handle generation ramps with finer granularity products
Generation
Hourly products profile
15min products profile
Balance forecast errors
Day-ahead forecast
Intraday forecast
Real Feed-in
Today, with an increased share of renewables in the emarket, new reasons for
intraday trading emerge:
2019 - EPEX SPOT – All rights reserved
Growing share of renewables requires markets to trade closer until delivery
July 2019 Confidential © EEX AG, 2019 13
Lead-time down to 45 min
API for Intraday
and Day-Ahead
Lead-time down to 30 min
Lead-time down to
5 min
2011 2017 2012 2015
Lead-time down to
5 min
2018
Volumes in intraday markets of EPEX SPOT
18.09.19 © 2019 14
0,0
10,0
20,0
30,0
40,0
50,0
60,0
70,0
80,0
90,0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
DE DE 15 AUCT FR GB NL BE CH AT TWh
Power Purchase Agreements (PPAs) A key instrument for investments in renewables
15
Power Purchase Agreement (PPA) Long term contract between a party generating and selling electricity and a party purchasing electricity. Have existed for decades.
Corporate PPA Corporate PPAs enable businesses to source electricity from generators at an agreed price, while giving producers a reliable, guaranteed buyer at a stable price.
© EEX AG, 2019
Renewable PPAs Electricity traded between the two parties comes from a Renewable Energy power plant. PPAs are often necessary in order to secure financing from a bank for new renewable energy projects. Purchasers can be utilities or corporates, often attracted by ‘green credentials’ in having their power supply come from 100% renewable sources. RE PPAs are often fixed for long periods, up to 15 years, to ensure revenue security for the developer.
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Long-term hedging of renewable energy assets with financial power futures
16
Old hedging horizon
New hedging demand for renewable energy financing
Market participants in Europe are increasingly using financial power futures in order to help secure financing from banks for new assets and/or manage long-term price risks.
Following requests from the industry, EEX is currently working to extend it’s product range by listing financially settled Power Futures for up to 10 years in advance.
Currently available EEX Financial Power Futures
© EEX AG, 2019
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
Japan Power Market Framework § Electricity consumption 1,020 TWh/year
§ 4th largest power market in the world
§ 10 zones
§ 2 frequency levels (60 Hz / 50 Hz)
18
Tokyo
Osaka
Confidential © EEX AG, 2019
Japan Power JEPX spot auction – average daily volume
Confidential © EEX AG, 2019 19 Source: Article “Power Futures Seen as the Future of Faded Commodity Exchange”, Bloomberg 2019
in million kW
h
900
800
700
600
500
400
300
200
100
0
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
21
Connecting the Japanese Power Community
Confidential © EEX AG, 2019
Japanese
utilities
Japanese independent
retail suppliers
EEX network of trading participants,
brokers and market access providers
ECC clearing banks
Developing an OTC-cleared market for Japan
22
§ Combining the current trading paradigm (OTC bilateral) in the Japanese market with the security and transparency of a cleared venue
§ Cash-settled power futures are the ideal trading and hedging instrument for financial and physical players
§ Transactions will be arranged by brokers and are subsequently registered at EEX
§ No central orderbook for Japanese power at EEX
§ METI confirmed that EEX can provide a clearing service for Japanese Power Futures under the Japanese Commodity Derivatives Act
Confidential © EEX AG, 2019
Broker
Trading Participants
Clearing assures the proper fulfilment of each contract concluded or registered at EEX
The concept of clearing
23
After a trade has been concluded, it will be cleared by ECC. In doing so, ECC serves as the
contractual partner for both buyer and seller.
ECC ensures the fulfilment of each trade and mitigates the counterparty risk.
Benefits of clearing
• Transparency
• Reliability
• Security (Risk Mitigation)
July 2019 Confidential © EEX AG, 2019
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
25
Kansai Area
Product Specifications: Currency: Japanese Yen Pricing: in Yen/kWh
Minimum price fluctuation: Yen 0.01 per kWh Contract Size: 1 MW (1,000kW) x number of hours
in delivery period Minimum lotsize: 1 contract
Week Base / Peak
up to 5 weeks
Month Base / Peak
up to 7 Months
Quarter Base / Peak
up to 7 Quarters
Season Base / Peak
up to 4 Seasons
Years Base / Peak
up to 6 Years
Tokyo Area
EEX Japan Power Futures - Product Details
• Peak definition: int. standard, Mo-Fr 08:00am – 08:00pm
• Existing EEX trading calendar
Confidential © EEX AG, 2019
Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX Japanese Power Futures: product overview
EEX in Japan – building a transparent and secure long-term market
Conclusion & Next Steps
EEX Japanese Power Futures Bringing best-practices from Germany to Japan
27
§ Proven track record in building liquid power markets
§ European power markets are perfect blue-print for Japan
§ Well-established clearing model with global distribution
§ Local presence in Japan
Confidential © EEX AG, 2019
EEX Japanese Power Futures Next Steps
28
§ Product Launch: Q1/Q2 2020
§ Series of webinars in cooperation with Bloomberg
§ Numerous stakeholder meetings and seminars in Japan
§ Dedicated workshops in Tokyo and Singapore in Q4 2019
Confidential © EEX AG, 2019
Thank you
シュテフェン・リーディガー
Steffen Riediger Director, European Power Derivatives
steffen.riediger@eex.com
Contact :report@tky.ieej.or.jp
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