June 21th, 2024 | 6:38


The European Commission seeks to boost liquidity in energy futures markets

Maria Jose Gonzalez

May 21, 2024 | 7:30 p.m.

The European Commission (EC) has begun analyzing how to improve liquidity in forward energy markets, an effort that includes a public consultation scheduled for later this year. This initiative is part of the new EU electricity market design rules and should begin once these come into force, which is expected in the coming months.

Formal evaluation and objectives

Anne Radermecker, energy markets policy officer at the EC energy department, informed Montel that the formal assessment must be completed within 18 months. The EC should assess the impact of possible changes to the way long-term financial transmission rights are sold by network operators, including extending their maturities to at least three years.

Furthermore, the assessment should also consider whether the EU needs regional virtual centers for trading in forward markets and, if so, which physical energy supply zones would be included in them. The goal is for the reference prices of these virtual centers to strongly correlate with the prices in the physical supply areas covered by the virtual center.

Virtual centers and reference prices

To calculate the reference prices of these regional virtual centers, the EC should consider methods that ensure a high correlation with prices in the corresponding physical supply zones. This is crucial to ensure that reference prices are representative and useful to market participants.

Based on the results of this assessment, the EC should adopt specific measures to improve liquidity within two years, which could potentially happen by the end of 2027. These measures aim to not only improve liquidity, but also make forward markets more efficient and reliable for market players.

Energy regulation forum in Florence

Radermecker mentioned that the EC hopes to present its initial ideas at the energy regulation forum in Florence, scheduled for May 27-28. This forum brings together the EC, national governments, regulators and other stakeholders to discuss the problems of the EU internal energy market.

The Florence forum is a key platform for debate and cooperation between the various stakeholders in the European energy market. Here it is hoped that the EC will receive valuable feedback that can influence the direction of its policies and measures to improve liquidity in the forward energy markets.

Importance of liquidity in forward energy markets

Liquidity in forward energy markets is critical to several aspects of the energy market. Greater liquidity allows for better risk management for market participants, improves price formation and facilitates the entry of new players into the market. Furthermore, greater liquidity can contribute to greater stability and predictability of energy prices, which is beneficial for both producers and consumers.

Conclusions and next steps

In summary, The European Commission is taking significant steps to address liquidity in forward energy markets, recognizing its importance for an efficient and competitive energy market. With public consultation scheduled and formal evaluation underway, these initiatives are expected to lead to substantial improvements in the coming years.

Participation in the Florence forum and public consultations will provide a platform for all interested parties to contribute to the discussion and help shape future policies. The ultimate goal is to create a more robust and liquid energy market that benefits all actors involved and promotes energy security in the region.

Ultimately, The EC is committed to taking concrete measures based on the results of its assessments to ensure that forward energy markets are more liquid, efficient and resilient. This will not only strengthen the EU's internal energy market, but will also contribute to the broader goals of energy security and sustainability in Europe.

More news