Apr 19th 2017

By: Ioannis Psarros
Head of Trading, Watt + Volt S.A.
Business Development Manager, E-ntelligence Consultants ltd.



Established as early as 2002, the European Energy Exchange (EEX) has evolved from a local power exchange towards the leading energy exchange in Europe. Today it covers a big variety of contracts for power, coal, gas, emissions. EEX is a member of Deutsche Boerse Group since April 2011 something that guarantees the quality and the high-level of operations. Today, EEX is part of a group of companies (EEX Group) that establishes international partnerships and plays a decisive role in European energy trading. Alongside EEX, EPEX SPOT, Powernext, Cleartrade Exchange (CLTX), Gaspoint Nordic and Power Exchange Central Europe (PXE) are also part of EEX Group. Given this the whole power market either gets access to contracts or uses EEX indexes as reference for trading. The Clearing and Settlement of trading transactions are provided by the clearing house named: European Commodity Clearing (ECC). European Commodity Clearing is the central clearing house for energy and related products in Europe. This creates a very stable and transparent environment for trading firms. The big advantage of this structure is the limited (if not zero) counterparty risk, the simple and unified participation rules as well as the transparent way of price formation.


Throughout the last years EEX Group expands in foreign power markets and traders can already find contracts for Germany, Austria, France, Italy, Spain, Belgium, Switzerland, UK, Romania, Nordic Countries and Greece. It offers:
• Intraday products
• Day – Ahead Products
• Futures, as well as
• Options (for some markets)
Especially for Romania and Greece, EEX offers so far only trade registration for financially settled contracts (contracts with no physical delivery). The Greek Index (SMP – System Marginal Price) started being traded through EEX in December 2014. Ever since EEX strengthens its presence in the Greek market (as it does in CEE countries as well) and market participants welcome this strategy. To support the above we do not need but to check the below graph:


Exhibit #1: Number of Admitted Participants for Greek products in EEX
Source: EEX AG

As we can see at the starting month of December 2014, we had 16 companies registered for trading the Greek power index. One year later participants almost doubled and EEX counted 28 active companies for Greek products, which are limited to Month Ahead, Quarter Ahead and Year Ahead ones. But the breakthrough happened in 2016, a significant year which added 183 companies with admission to the Greek financial power contracts. Thus, the total number of registered companies at the end of 2016 reached the number of 211 (something over 650% increase year over year).
Almost 700 GWh have been traded from December 2014 (the month that EEX launched the Greek contracts) till the end of March 2017. Significant is to state that 225 GWh have been traded through EEX platform during the first quarter of 2017, while for the whole previous year (2016) the total traded volume of Greek contracts was 292 GWh, as we can see in Exhibit #2! If this rhythm of development will continue throughout whole 2017, we will reach at the end of the year the volume of approximately 900 GWh. In that case on a year over year comparison we will have achieved an increase of more than 200%! As shown in Exhibit #2, from 2015 to 2016 the market almost doubled and in 2017 we expect even bigger increase. This development has been achieved due to some specific factors, which we can see below:
– The market is still immature so it is expected to develop fast at the very first steps
– EEX and several brokers persist on supporting the Greek market
– The higher the country risk the more the market players will prefer financially settled products
– Big western European companies focus on SEE and the Balkan region due to high margins. In the same time EEX offers to them zero counterparty risk
– The trust that the Greek trading firms show in financially settled contracts is increasing day by day
– The power price volatility in whole Europe from December 2016 to March 2017 has given a strong push


Exhibit #2: Total traded MWhs since 2014 (for 2017 the 1st quarter only)
Source: EEX AG


The strong price volatility in Europe during the 4th quarter of 2016 which continued in the 1st quarter of 2017 (especially during January and February 2017) led many traders either to hedge large physical positions through financial ones or to try to speculate on price movements and get big profits. This created high liquidity in EEX products for Greece something that is very well depicted in Exhibit #3, here below:


Exhibit #3: Total traded MWhs since 2014 (per Quarter)
Source: EEX AG

As we can see during the 4th quarter of 2016, 230.160 MWh have been traded while the previous quarter only 47.800 MWh. The increase is huge and for the first time we had Yearly Contracts for the Greek Power Market which have been traded in November and December 2016.
On the other hand, during the 1st quarter of the current year (2017) there have been exchanged already 225.440 MWh while last year the same period only 3.710 MWh. Again, the comparison is useless, we see a totally different market year over year (Exhibit #3).
At this point we should also refer to the Over The Counter (OTC) deals which also gain in importance and traded volumes. OTC means that the two counterparties come in communication through a brokering house or with direct communication channel. As we can see under Exhibit #4 here below, during the 1st quarter of 2017 we had 17.160 MWh traded OTC while in the same period a year ago only 360 MWh. This is an increase of 460%! On top of this we can see again the big volumes which have been traded on an OTC base during the 4th quarter of 2016, due to the same reasons as in EEX case.
Lastly, the trades which come in place on a bilateral basis (outside EEX or without any broker) show the same increase from what the market says. In this case, it is very difficult to present some exact numbers since these volumes are not being monitored under a specific platform.


Exhibit #4: Total traded MWhs OTC, since Jan 2016


EEX considers the extension of its offering for the Greek Power Futures Market, in line with broadening the product portfolio for European power derivatives as a whole. This would increase even more the liquidity and it would give more choices for participants to hedge positions or to make profits. In that sense, we have also to take a look on the developments between the Market Operator (LAGIE) and the Athenian Stock Exchange (Athex Group). These two organizations have recently signed an MoU for their future cooperation so as to establish the Greek Power Exchange, which will operate in similar way to the Western European ones. Their plan is to offer both contracts with physical delivery as well as financially settled ones. Therefore, there might be the case in the near future to see two competitive market places offering solutions for the Greek Power market.


To sum up we would say that the glory days for the Greek Power Market are ahead of us. It is true that it has taken long until the market reached this point. The steps are sometimes slow but we get the feeling that lately the rhythm of transformation gets stronger. In the environment which we have imagined the Greek Power Market will be the first to be coupled to EU among SEE countries and the first to introduce all levels of products: Intra-Day, Day-Ahead, Monthly, Quarterly and Yearly ones, in both physical and financial structures. In addition, we believe that this evolution will minimize the country risk, will give enough alternatives to large end-customers and will provide the right landscape for increased investments from current or new energy companies.