The document discusses competition in power markets in the Nordics. It argues that competition will help achieve the objectives of the Energy Union by improving effectiveness through adaptation to new regulations, innovation, and product development. Competition will also improve efficiency through digitalization and cost reductions. The document suggests that competition between exchanges will help bridge client pools, short-term and long-term markets, and connect European hubs. This could help address the current low liquidity in Nordic power markets.

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?