Hedging period: EEX reports record trading volumes in electricity futures

A record volume of electricity futures contracts was traded on the European Energy Exchange (EEX) in Leipzig last year. EEX Chief Executive Peter Reitz expects the growth trend to continue this year. The international news website Montel reported.

The volume of electricity futures contracts traded on EEX rose by 55 % year on year to a record 5 185 TWh last year. That figure is almost twice the EU’s annual gross electricity generation, which has long been around 2 900 TWh.

The sharp year-on-year increase in traded volumes is partly due to a low comparison base, as trading volumes fell by 27 % year on year in 2022 amid the energy crisis and record-high electricity prices on European markets.

According to Reitz, the crisis is gradually fading from energy markets, and trading volumes are therefore rising, partly thanks to lower collateral requirements for trades.

“What we are seeing in the first weeks of this year is a continued rapid increase in trading volumes, so growth is continuing and we are very optimistic about 2024,” Reitz said.

Montel added that, according to published data, the volume of electricity futures contracts traded on EEX in January was up 88 % year on year.

Greater awareness of price risk

The EEX chief added that the number of electricity traders active on the Leipzig exchange is also growing alongside trading volumes. More than 70 joined last year.

“The crisis has generally raised awareness of price risk in the electricity market,” Reitz said.

Electricity prices surged to unprecedented levels last year. For example, the European benchmark—the German futures contract for baseload electricity delivery over the following year—averaged almost 300 EUR/MWh, with a peak of 1 050 EUR/MWh.

So far this year, the average price of that contract has been 81 EUR/MWh. After falling as low as 68 EUR/MWh last week, it edged up and is currently around 75 EUR/MWh.

“We had never seen prices like the ones we experienced, and people are aware of what can happen,” Reitz added, saying he believes that greater awareness of price risks has made futures contracts an important hedging tool.