What are the different types of electricity markets?
Power Exchanges are used for anonymous and transparent trading. A multilateral trading platform is set up, where market participants submit demand or supply bids. Typically the day-ahead and intraday-market are power exchanges but there are also power exchanges for long-term future products. Typically the market operator aggregates all the demand bids and all supply bids and clears the market. For the day-ahead market this happens based on the principle of the merit order curve. Or the platform allows direct anonymous contracts between the market actors by clicking on the demand or supply bid of the counter party as in the case of the intraday market platform. The products offered on the power exchanges are standard products for which the demand is high enough to ensure liquidity and a good price.
OTC markets are used for bilateral trading. Often brokers (intermediaries) bring trading parties together to trade electricity, mostly via framework contracts, however direct trading between two parties is equally possible. Any type of electricity product (e.g. block contracts, only during certain hours, for a few days or a specific period, specific constraints and conditions, etc.) can be negotiated and traded. Prices are confidential and not transparent to other market parties. However, the transparent market prices from the Power Exchanges are mostly used as a reference. The main volumes of long-term contracts are typically traded on OTC market.
Organised OTC markets
In an organised over-the-counter market, market participants submit supply and demand bids to a market platform just like a power exchange. It is cleared continuously though, which means that supply and demand bids are matched on a continuous basis. Interested parties can click an offer to agree on it and make the deal.