Montel Nordic Energy Days 2018

1. Power markets in motion:
Competition in the Nordics?
Heine Rønningen,
Montel Nordic Energy Days, 22-23. August 2018

2. Power markets in motion:
Competition in the Nordics?
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Why:
 Competition is the single most important mechanism of achieving the
objectives of the Energy Union (destination)
 Competition will improve effectiveness (direction): adapting to the new
regulatory regime, innovation, and product development
 Competition will improve efficiency (speed): digitalization, cost, ++
X
motion destination
competition
direction & speed

3. The «Value proposition» of exchange competition
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Reluctance to change has been the main Nordic problem for the last
decade - the result is all-time low liquidity...
Competition will result in bridging the elements and expanding the
total:
 Bridging client pools - multiple exchanges in each market segment will
increase the total potential: Current Nordic client pool is too small,
clients with multiple exchange access will connect the different pools
 Bridging short term and long term markets – the current structural gap
between Futures, DAM ,and IDM is artificial: It is all electricity contracts
and can be traded on the same platforms
 Bridging European hubs and innovation of relevant hedging – price
convergence in Europe will make long dated System price Futures
redundant: Trading the most liquid hub is more rational if price drivers
are the same

4. EEX Group
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• Market leader in exchange
traded electricity in Europe
• Strong presence in other
markets like gas and emission
• Futures, DAM, and IDM in a
single clearinghouse
• Large client base with a high
share of financial traders
• Full Nordic entry in 2019

5. European Energy Exchange
www.eex.com
Heine Rønningen
heine.ronningen@eex.com
+47 90 60 87 74

6. Current nordic client pool is too small – the result is
a strong liquidity trend - in the wrong direction...

7. Nordic Liquidity Assessment – Root Cause Analysis:
Risk Capital and Alternative Stronger Trading Hubs
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 The Nordic liquidity decrease can be seen as a function of the Phelix success:
 Solution:
 Use Phelix as a proxy hedge for long dated futures (year ahead +)
 Improve spread trading Phelix and “Nordic hedging contracts”
 Focus product development on short dated futures for Nordic hedging
alternatives (weather driven basis risk materialise short term)

8. An Energy Union success induces price convergence
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Why trade the illiqiud locations when you can trade the hub?