US Futures Exchange launches renewable energy futures with wind power
The Chicago-based US Futures Exchange has announced plans to list futures contracts on Nordix Financial Wind Indexes, created by Weather Bid, that measure deviations from average wind speeds used in wind power generation and offer a financial hedging vehicle for wind resource owners, developers and financiers as well as consumers of wind energy.
Nordix Financial Wind Indexes are benchmarks for wind variability. USFE's futures contracts, which will begin trading this summer, are the first listed exchange products designed to reflect the needs of the greater renewable energy community, the exchange says, and are planned as the first in a series of contracts based on renewable energy.
'As generation capacity of renewable energy continues to grow exponentially, so has the need for standardised hedging tools similar to those found in traditional energy markets,' says chief executive Satish Nandapurkar. 'We are pleased to partner with Weather Bid, which has created valuable indexes to promote the growth and viability of wind power as a clean and diversified energy source.'
The Nordix Financial Wind Indexes are composed of deviations from 20-year historical wind speed averages compared with present daily figures. USFE will initially list seven index futures contracts based on two wind regions in New York state and five in Texas as defined by the National Oceanic and Atmospheric Administration's National Center for Environmental Prediction division. The futures contracts will be settled monthly.
'It's expected that the US wind market will grow by more than 8,000 megawatts over the next two years,' says Weather Bid president Elliot Stern. 'The exchange environment offers numerous benefits to customers who already trade over the counter contracts based on our indexes.'
USFE and Weather Bid plan to develop a comprehensive suite of futures contracts for the benefit of renewable energy, including hydro, solar, geothermal and biomass, and will work closely with renewable energy advocacy groups to promote the new contracts.
'USFE's futures contracts exemplify the kind of financial vehicles that further validate the financial merit of wind power as an option for many, if not most, utility companies' power generation portfolios,' says Michael Eckhart, president of the American Council on Renewable Energy. 'We believe the ability to hedge against future profit variability will encourage businesses to take steps toward adopting renewable energy.'
USFE, which was established in its present form last year following Man Group's investment in the former Eurex US exchange, offers derivatives products designed to meet the needs of retail, hedge fund and institutional customers in a regulated, centrally-cleared futures and options exchange.
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