Monday, October 18

EEX bourse prices power for up to 10 years to help push renewables roll-out


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FRANKFURT — The European Energy Exchange (EEX) on Monday expanded its yearly power futures contracts for Germany, Italy and Spain to 10 calendar years ahead from six currently, part of a move to help integrate renewable energy into the wholesale power market.

EEX, a subsidiary of Deutsche Boerse, is the world’s leading electricity exchange, where annual maturities form price benchmarks for producers, consumers and investors in power generation.

The sector is changing rapidly as conventional production from burning fossil fuels like gas and coal gives way to the roll-out of wind and solar power.

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To finance the expansion of renewables, the market needs to transition away from state-guaranteed feed-in tariffs, which pay producers for energy fed into the grid, towards other instruments to make infrastructure operable.

So-called power purchase agreements (PPAs) – long-term deals under which businesses contract to buy electricity from renewable energy producers – can help drive renewable investment by guaranteeing generators’ revenues. They are becoming increasingly popular, especially in Spain and Italy.

Because the price picture beyond the six years available on EEX has so far been murky, would-be PPA investors often felt blocked because they could not demonstrate to lenders that their proposals were backed by a solid plan to hedge price risks. Would-be producers also faced similar risks due to reduced price visibility. The ten-year span now on offer on EEX changes this, said Chief Operating Officer Steffen Koehler.

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“The fact that we already have six annual maturities improves the starting position of the market participants for the new products,” Koehler said.

In turn, the exchange’s liquidity in the existing six years should receive a further boost from wider participation, he said.

The EEX is striving to widen its role in environment, freight and other products to complement its flagship power and gas business.

Steffen Riediger, EEX’s director for European power derivatives, said demand for renewable power was rising from the corporate sector keen to reduce its carbon footprint, and that companies were seeking PPAs.

“The deals we will see will have massive volume sizes and massive nominal values,” he said.

The contracts will be displayed on Refinitiv Eikon on this chain: (Reporting by Vera Eckert; Editing by Jan Harvey)



financialpost.com

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