The European Energy Exchange (EEX) is set to expand its product range with the launch of new long-term power futures expiries. From 27 September onwards, EEX will extend the number of tradable yearly maturities for German, Italian and Spanish Power Futures from the current six to ten calendar years.
This enhancement will enable customers to hedge their price exposure up to 10 years in advance which will further promote the integration of renewable energy into the power market.
Renewables are widely recognised as the most cost-efficient way to add new capacity for power production. However, financing can prove difficult when investing during the start-up phase as such long-term commitments involve certain risks like the default of one or more counterparties or uncertain revenues for the electricity production. By using Power Purchase Agreements (PPAs) renewable energy players can already partially mitigate some of these risks eg by fixing the sales and therefore creating more reliable income streams for 10 or even more years.
PPAs have already become an essential part in subsidy-free renewable investments, and therefore are a key instrument for the energy transition. By extending the EEX product curve to 10 years, market participants will be able to hedge prices for “a full decade” on the exchange.
Dr Tobias Paulun, Chief Strategy Officer of EEX, says: “Already today market participants have the opportunity to hedge against price change risks from PPA contracts up to six years in advance with the standardised and financially settled power futures at EEX. At the same time, our clearing house fully reduces the counterparty default risk, so that all positions will be fulfilled even if one of the contracting parties defaults.”
“I am delighted that we’re now in a position to extend our power futures offering up to a total of 10 years in advance. Many customers, especially in markets with widespread use of PPAs such as Spain, want to use the EEX futures for an even longer period of time to hedge their price and counterparty risk,” says Peter Reitz, CEO of EEX. “By adding these new maturities EEX is providing additional instruments for the renewable energy sector which support the expansion goals of renewable energies and the transition from feed-in tariffs to subsidy free power markets. We’re convinced that such a market based approach is a key element to successfully handle the challenges towards a decarbonised energy sector and a climate neutral economy.”