IEEJ：September 2019 © IEEJ2019

EEX Group – developing liquid markets
with growing renewables share
Steffen Riediger | シュテフェン・リーディガー
Director Power Derivatives

AgendaEEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next StepsWe are a Global Commodity Exchange GroupNorth AmericaEuropeAsia-Pacific

July 20193

EEX Group – Global Position
North America#1in Power
Trading
Worldwide
Confidential© EEX AG,2019EuropeAsia-Pacific#2in Emissions Trading
Worldwide#3in Natural Gas Trading
Worldwide
July 2019
4

POWER SPOT

NATURAL GAS

POWER DERIVATIVESAGRICULTURAL MARKETSENVIRONMENTAL MARKETSGLOBAL COMMODITIESCLEARING SERVICES

MARKETSANDSERVICES

MARKET DATA SERVICESREGISTRY SERVICES
Confidential © EEX AG, 2019

EEX – the home of power trading worldwide

Coveragein 2000

Coveragein 2019

EEX Performance in Power DerivativesA proven track record…
TWh
4.500
4.000
3.500
3.000
2.500
2.000
1.500
1.000
500
0
2002

2003

2004

Confidential © EEX AG, 201920052006

2007200820092010

2011

20122013201420152016201720182019(midSep)

7Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next StepsEEX Group operates markets along the wholechain of power trading

FUTURES
MARKET

DAY-AHEADAUCTIONINTRADAYCONTINUOUS

Years / Months /Weeks before
deliveryOne day
before delivery

Until 5 mins before
deliveryHEDGINGPLANNEDPRODUCTION AND
CONSUMPTIONFLEXIBILITY

Integrated & Secure Clearing Solution
2019 - EPEX SPOT – All rights reserved9

The pivotal role of EPEX Spot for the marketbased integration of renewable energy sources
Thereof marketed under direct
marketing mechanism (July 2019)

German energy market
Installed capacities of wind and solar (in GW)
605040•100% wind offshore•

95% wind onshore•

25% photovoltaic•

integration of renewables into theexchange spot market strengthens
the reference price signal ofexchanges•

studies show that direct marketersalign their feed-in behaviour withthe market price, particularly intimes of negative prices

3020100
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Wind energy

Photovoltaic
Source: REN21 (2019)2019 - EPEX SPOT – All rights reserved10Agenda
EEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next StepsDrivers for the growth of intraday markets
Today, with an increased share of renewables in the emarket, new reasons for
intraday trading emerge:
Balance forecast errors

Handle generation ramps with finer
granularity products
GenerationDay-ahead forecast

15min products profile

Intraday forecast
Real Feed-in

Hourly productsprofile

2019 - EPEX SPOT – All rights reserved

12Growing share of renewables requires markets
to trade closer until delivery

2011
Lead-time
down to45 minConfidential © EEX AG, 20192012
API forIntraday
andDay-Ahead2015

2017

2018

Lead-time
down to30 minLead-time
down to5 min

Lead-time
down to5 min

July 201913

Volumes in intraday markets of EPEX SPOTTWhDE

DE 15 AUCTFRGBNLBECHAT

90,080,070,060,050,040,030,020,010,00,02004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

© 201918.09.19

14

Power Purchase Agreements (PPAs)
A key instrument for investments in renewables
Power Purchase Agreement (PPA)Long term contract between a party generating and selling electricity and aparty purchasing electricity. Have existed for decades.

Corporate PPA
Corporate PPAs enable businesses to source electricity from generators at
an agreed price, while giving producers a reliable, guaranteed buyer at astable price.

Renewable PPAs
Electricity traded between the two parties comes from a Renewable Energypower plant. PPAs are often necessary in order to secure financing from abank for new renewable energy projects. Purchasers can be utilities orcorporates, often attracted by ‘green credentials’ in having their power supply
come from 100% renewable sources. RE PPAs are often fixed for longperiods, up to 15 years, to ensure revenue security for the developer.
© EEX AG, 201915

Long-term hedging of renewable energy assets
with financial power futures
Market participants in Europe are increasingly using financial power futures in order tohelp secure financing from banks for new assets and/or manage long-term price risks.
Following requests from the industry, EEX is currently working to extend it’s productrange by listing financially settled Power Futures for up to 10 years in advance.

New hedging demand for renewable energy financing

Currently available EEX Financial Power Futures

Old hedging horizon
2020© EEX AG, 2019

2021

2022

2023

2024

2025

2026

2027

2028

2029

16

AgendaEEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next StepsJapan Power
Market Framework§ Electricity consumption 1,020 TWh/year§ 4th largest power market in the world§ 10 zones§ 2 frequency levels (60 Hz / 50 Hz)
Tokyo
OsakaConfidential © EEX AG, 201918

Japan PowerJEPX spot auction – average daily volume
900
800
700

500
400in million kWh600

3002001000Source: Article “Power Futures Seen as the Future of Faded Commodity Exchange”, Bloomberg 2019
Confidential © EEX AG, 201919

AgendaEEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next Steps

Connecting the Japanese Power Community

Japaneseutilities

Japanese independent
retail suppliers

EEX networkof trading participants,brokers and market
access providers

ECCclearing banks

Confidential © EEX AG, 201921

Developing an OTC-cleared market for Japan§ Combining the current trading paradigm (OTC bilateral)in the Japanese market with the security andtransparency of a cleared venue§ Cash-settled power futures are the ideal trading andhedging instrument for financial and physical players

Trading
Participants

Broker§ Transactions will be arranged by brokers and aresubsequently registered at EEX§ No central orderbook for Japanese power at EEX§ METI confirmed that EEX can provide a clearing servicefor Japanese Power Futures under the JapaneseCommodity Derivatives Act

Confidential © EEX AG, 201922

The concept of clearing
Clearing assures the proper fulfilment of each contractconcluded or registered at EEX

After a trade has been concluded, it will be clearedby ECC. In doing so, ECC serves as thecontractual partner for both buyer and seller.

Benefits of clearing•

Transparency•

Reliability•

Security (Risk Mitigation)

ECC ensures the fulfilment of each tradeand mitigates the counterparty risk.
Confidential © EEX AG, 2019

July 201923

AgendaEEX Group – the global commodity exchange groupEEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next StepsEEX Japan Power Futures - Product Details
Kansai Area

Tokyo Area

Week
Base / PeakMonth
Base / Peak

Quarter
Base / Peak

SeasonBase / Peak

Years
Base / Peakup to 5weeks

up to 7Monthsup to 7
Quarters

up to 4
Seasons

up to 6Years

Product Specifications:
Currency:
Japanese Yen
Pricing:
in Yen/kWh
Minimum pricefluctuation:
Contract Size:
Minimum lotsize:

Confidential © EEX AG, 2019

Yen 0.01 per kWh
1 MW (1,000kW) x number of hours
in delivery period
1 contract•

Peak definition: int. standard,
Mo-Fr 08:00am – 08:00pm•Existing EEX trading calendar

25

AgendaEEX Group – the global commodity exchange group
EEX Group’s services for a market based integration of renewables
Current trends in Europe - short-term trading and long-term hedging
Status of the Japanese power market from EEX’s perspective
EEX in Japan – building a transparent and secure long-term market
EEX Japanese Power Futures: product overview
Conclusion & Next StepsEEX Japanese Power Futures
Bringing best-practices from Germany to Japan§ Proven track record in building liquid power markets§ European power markets are perfect blue-print for Japan§ Well-established clearing model with global distribution§ Local presence in Japan

Confidential © EEX AG, 201927

EEX Japanese Power Futures
Next Steps§ Product Launch: Q1/Q2 2020

§ Series of webinars in cooperation with Bloomberg§ Numerous stakeholder meetings and seminars in Japan§ Dedicated workshops in Tokyo and Singapore in Q4 2019

Confidential © EEX AG, 201928

Thank you
シュテフェン・リーディガー
Steffen Riediger
Director, European Power Derivatives
steffen.riediger@eex.com

Contact :report@tky.ieej.or.jp