Greek spot market launch to boost forward liquidity

Greek forward liquidity is expected to see a boost from the launch of the day-ahead spot power market and new long-term products in November, chairman of Greek energy exchange Henex George Ioannou said.

"Participants will have to trade derivatives as the day-ahead market introduces variability," Ioannou told delegates at the Energy Commodities conference in Athens today.

Henex launched a domestic derivatives market, which offers monthly products, in March. But so far, only one trade has been concluded on the platform, as repeated delays to the day-ahead market launch and increasing liquidity on the Germany-based European Energy Exchange (EEX) have weighed on trading interest within Greece.

But the day-ahead market is now ready to be launched without further delay, Ioannou said. Dry runs were concluded on 16 October, while a connectivity test is expected to take place on 23 October. The final mock run for both the day-ahead and intra-day platforms will be held on 26 October, with the official launch due on 31 October.

Prices obtained in dry runs mostly converged with existing day-ahead pool results, but occasional disparities were observed as some participants tested "extreme" strategies and made mistakes during the tests, Ioannou said.

Henex will also introduce new monthly, quarterly and yearly products on its forward trading platform following the launch of the day-ahead market. Participants will be able to trade base and peak load for up to seven months, including the current month, four quarters and the year-ahead for either physical or financial delivery. Trades are currently limited to four months and can only be settled financially.

Market coupling

Greece is still on track to be coupled with the Italian power market by the end of this year, Ioannou said.

The coupling was most recently expected to be pushed back to the first quarter of 2021 owing to delays to the launch of the day-ahead market, which is one of the prerequisites for integration with neighbouring markets.

Greece is also planned to couple with Bulgaria next year, according to Henex. The Bulgarian government also targeted the same date for market coupling with Greece in its draft sustainable energy development plan last month.

The coupling with Bulgaria will follow Greece's accession next year to single intra-day power market coupling, which includes 19 other European countries.

EEX

The day-ahead market is also expected to provide support to Greek financial contracts on the EEX, EEX senior sales manager Alex Papageorgiou told delegates.

A combined 1.6TWh of Greek forward contracts traded on the platform in January-September this year, up by 660pc from the same period in 2019, when liquidity totalled 0.24TWh. At the same time, Greek traded volumes reached 300GWh on 1-19 October, on track to reach a new monthly high since November.

Greek forward liquidity on the EEX is projected at 2.1TWh by the end of this year, against 0.7TWh in 2019. Trading activity should continue to see greater interest from the start of 2021, as participants could first wait and see the development of the spot market in November-December this year, Papageorgiou said.

The EEX is also considering launching Greek weekly products by the end of 2021, in line with requests from Greek participants. But this would be a step back from last year, when the exchange sought to introduce day-ahead and weekend products along with weekly contracts.

By Bilal Muftuoglu