EEX market leader in Japan power futures after first year

European Energy Exchange AG

18/05/2021 09:00

* Germany-based bourse aims to double players this year
    * Traded 2.32 TWh in first quarter 2021, boosted by winter
    * Some 20 participants from Japan, overseas already active

    By Vera Eckert
    FRANKFURT, May 18 (Reuters) - The European Energy Exchange
(EEX) could double the number of participants in its Japanese
power futures market from around 20 players in 2021, having
traded over 3 terawatt hours (TWh) in its first 12 months,
executives said.
    Interest in wholesale trading was boosted by extremely cold
weather early this year, which left Japanese retail suppliers
undercovered, said Steffen Riediger, director for Power
Derivatives at the EEX, a unit of Deutsche Boerse  DB1Gn.DEd .
    The harsh weather highlighted Japan's reliance on gas
imports for power, if nuclear and renewables do not provide
enough supply.
    "This demonstrated the rationale behind hedging supply
gaps," Riediger said in an interview. "It demonstrated the
importance of futures, especially bourse-traded ones, which
eliminate counterparty risks."
    The 3 TWh EEX futures traded in Japan since May 18, 2020 are
equivalent to supplying electricity to a city of 350,0000
inhabitants for a year, Riediger said.
    While that is still small compared to Japan's power
consumption of 1,000 TWh a year, it shows the huge size of
trading potential in a country that has twice Germany's power
usage.
    In its European core futures markets, EEX traded 4.7 TWh in
2020, up 19% from 2019. urn:newsml:reuters.com:*:nL8N2JU3BB
    EEX offers weekly, monthly, quarterly, seasonal and annual
delivery periods up to six years in advance, based on the index
set by local spot power bourse JEPX.
    Commodities and freight activities by the EEX span all time
zones, including North America. urn:newsml:reuters.com:*:nL4N2ID1NF
    "Japan was much faster than we thought," said EEX Chief
Operating Officer Steffen Koehler, comparing Japan with
Germany's year-long trek to arrive at mature power markets.
    EEX benefited from its clearing arm, the ECC, which was
known to international banks and brokers, who took their
customers along.
    In 2021's first quarter, traded volumes in Japan amounted to
2.32 TWh, representing 96% market share, leaving the remainder
to local rival TOCOM.

 (Reporting by Vera Eckert; Editing by Dan Grebler)
 ((vera.eckert@thomsonreuters.com; +49 30 2201 33654;
@EckertVera;))