POWER TRADING

Power (electricity) trading refers to purchasing and selling power between participants in the energy markets. Various forms of power trading are possible depending on the market design, ranging from short-term trading to long-term power purchase agreements.

“Market coupling" enables cross-border trading, allowing several European countries to trade on the same power exchanges.

Since power cannot yet be stored in large quantities, power trading is conducted using either short-term trades or long-term agreements in which the power has yet to be produced.

POWER TRADING MARKETPLACES

Generally, power is traded in different types of marketplaces. Some of which include:

1. 1. OTC: In OTC (over-the-counter) trading, power is directly traded between two parties, with prices and trading volume agreed upon in bilateral negotiations. These trades take place outside of power exchanges without intermediaries or clearing houses. OTC trading is the most common form of power trading, especially in the conventional power industry.
   2. Short-term power trading: In today's power trading, power exchanges are common -especially in Europe. While participants on the exchanges trade anonymously, the exchange's general framework provides a transparent system for multilateral trading. A typical type of power exchange is a short-term spot market. This includes markets such as the day-ahead and the intraday market, where power is traded for either the upcoming or current day.

The largest spot exchanges in Europe are the EPEX Spot and the Nord Pool, but there are also several local markets.

To ensure better market coupling and to allow cross-border intraday trading, EPEX Spot, Nord Pool, GME and OMIE established a harmonised trading system called XBID. On 12 June 2018, cross-border intraday trade was introduced in the EU between Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Latvia, Lithuania, Norway, the Netherlands, Portugal, Spain, and Sweden.

Known by its abbreviation XBID, the new mechanism harmonised trading systems and made it possible to coordinate bids from market players in the participating countries and to conduct cross-border intraday trades. However, such trades require enough availability of cross-border transmission capacity.

Short-term trading maximises revenues for power producers and minimises costs for power consumers. Both can actively optimise their operations and avoid costs for deviations in their forecast. Additionally, short-term trading helps to avoid costs for forecast deviations.

LIST OF SIGNIFICANT EUROPEAN ENERGY EXCHANGES