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Journal: Academic Bulletin "Economics and Region" (Vol.4, No. 47)

Publication Date:

Authors : ;

Page : 43-49

Keywords : energy exchange; liquidity; price; futures; spot; electricity; gas;

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At the energy market dealers enter into agreement for various kinds of products such as oil, gas, coal, electricity, etc. All those products have significant differences in physical characteristics, type of storage, method of extraction and transportation to the consumers. The most specific is electricity, traded due to the balancing of supply and demand in real time for each territory. Safe operation of the electrical system is provided with constant balancing and backup power sources (supporting necessary balance in the peak hours). For a long period of time electrical system in the energy market has been occupied by monopolistic companies. However, their inability to satisfy the demands of the society for price liberalization led to the loss of their monopoly positions. Instead of that creating of energy exchanges began. Providing a transparent market, in which the price is set by the balance of supply and demand for electricity, were the main tasks of power exchanges. The main purpose of the article is to highlight peculiarities of power exchanges functioning in the EU and development suggestions on this basis how to implement this experience into the practice of Ukrainian energy markets functioning. To achieve the purpose of the research, spot and futures markets of the Central Europe Power Exchange were analyzed. The existing futures contracts traded on the exchange were reviewed. Methods of the energy exchange trading and functioning were highlighted. The tendencies in the volume of supply and price fluctuations at the energy exchange in 2007-2014 were studied. The Central Europe Power Exchange (PXE) was created at the request of energy market liberalization. PXE formed a competitive environment and transparent trading rules. This led to the increase of liquidity of the exchange. The liquidity of the market permitted expanding of electricity trade to the neighboring countries, such as Slovakia, Hungary, Poland, and Romania. The ability to use derivatives helps maintaining the liquidity of the exchange. The exchange prices are based on the ratio of supply and demand. This is provided by a long-term support of fair electricity prices. The wholesale electricity market allows all participants of exchange to have equal trading conditions, regardless of their size and volume of transaction. In the course of its activity, the Central Europe Power Exchange faced with the consequences of the global financial crisis and regulatory changes in the electricity trade. Active participants of the exchange trades are manufacturers and suppliers of electricity. These participants cannot provide sufficient trading volume on the exchange. The decline of financial institutions’ interest in electricity trading led to changes in the trading volumes, prices and liquidity of the exchange. Development of electricity prices over the past five years was accompanied by a downward trend. The electricity price at the exchanges was decreased. It was caused by the slowdown of the world economy, active development of renewable energy and excess of electricity supply. A broader analysis associated with hedging prices and speculation on the stock exchange requires a separate and comprehensive study.

Last modified: 2016-08-17 17:50:32