What are the different types of electricity markets?


Electricity markets can not only be distinguished based on (lead) time, but also regarding their properties. There are three common types of markets: power exchange, over-the-counter (OTC) and an organized OTC which is cleared continuously.

Power Exchanges

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

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.

Besides the financial transactions, there are also the physical flows. To assure that the supply-demand balance will be fulfilled at moment of delivery, balancing creating parties are created. Learn more about them here.
How helpful was this article?/Hoe nuttig was dit artikel?/Cela a-t-il été utile?
[Total: 2 Average: 4.5]