market fundamentals

Question 1

differences between whole sale and retail market

Answer 1

whole sale market (each product has a transparent price):

• liquid market places
• transparent prices (signals)
• bilateral or exchange based
• limited number actors
• limited set of products with high degree of stand.
• PURPOSE: transfer of risk & optimisation of supply and demand

retail market ( Indiv. prices incl. risk premiums & retail markets):
- individually and bilaterally negociated
-individual prices, limited transparency
- taxes, charges, metering, transportation included
- full supply including including imbalance risk
- creates a competitive environment
PURPOSE: supply customers reliably

Question 2

shares of the sources of electricity in Germany

Answer 2

1. Renewables
2. Lignite
3. Coal
4. Nuclear
5. Gas
6. othes
7. oil

Question 3

What is the effect of increase of renew.and nuclear phaseout in. the merit order curve?

Answer 3

1. marginal cost increase
2. prices for electricity increase
3. co2 increase

Question 4

How does a general dispatching problem gets addressed

Answer 4

numerical models (fundamental models, fundamental analysis)

Question 5

what are the fundamental electricity price drivers?

Answer 5

FUEL PRICES;
GENERATION ( availability of conventional pp, hydro storage levels, wind speed);
DEMAND (function of
temperature, season, vacations;
TRANSMISSION (available cross-border capacities, price expectations in adjacent markets

Question 6

Electricity price drivers in the short term and midterm

Answer 6

short-term:
temperatures
precipitation, run-of-river
wind and solar forecasts
consumption
conventional power plant availabilities  
cross-border capacities

mid-term:
fuel prices
storage levels
changes in the pp

Question 7

what is driving the markets?

Answer 7

Fundamental Factors: (Give a fundamentally fair market price)

• Marginal cost of generation (pwplnts)
• Available generation capacity
• Weather
• Fuel and CO2 price developments
• cross-border capacities
• structure of hrly customer demand

Market factors ( market based fair price resulting from player expectations, assessments (and hence incl. risk premiums) and actual transactions:

• market expectation and fears
• trading strategies
• development in adjacent markets
• news and rumours

Question 8

What are some substantial changes to come?

Answer 8

• national political framework (energiewende- nuclear exit, expansion of transmission)
• european framework (emission reduction commitments)
• future generation mix and + growth of RES, stability of grid operation

Question 9

why will volatility increase

Answer 9

flattering of the hourly price due to PV
PV will increasingly replace missing bseload generation
PV + wind in combi. lead to increasingly volatility

Question 10

what does include the regulations in EM

Answer 10

Report on fundamental and transacting data
Prohibi. market manipulation and inside trading
obligation of registration as market participant

Question 11

characteristics of the electricity products

Answer 11

• futures/forwards traded for baseload, peak load, yearly, quarterly weekly, daily contracts
• hourly products traded shortly before delivery (day ahead and intraday)

Question 12

characteristics of gas market products

Answer 12

• lagging behind other commodity markets in term of liquidity.
• forward products for within a day, day ahead, weekend, months, quarters, years, seasons

Question 13

Characteristics of oil trading

Answer 13

• differents means of transport (pipelines, vessels)
• traded for short term and long term
• crude oil needs to be refined prior use
• products: gasoil, jet fuel, diesel, gasoline, biodiesel
• most importan: gasoil

Question 14

Characteristics of Coal trading

Answer 14

• two categories of coal: cooking and steam coal
• coal prices depend on the point of delivery because costly transportantion
• traded in metric tons and USD (lot sizes of 1000 tons)
• futures and forwards products for the front products reasonable liquidity needed.

Question 15

how does a typical deal flows?

Answer 15

1. initiation= Bilateral/ Broker /Commodity Exanchge
   2.closesure=verbarly/ screenclick/ Booking
   3.trade controlling=
   every trade is cross-checked additionally and mutually confirmed (fax/electron.) by the back office stuff.
   every deal is treated as full contract in combination with the existing general agreements.
   Deals are invoked monthly after delivery(physical/financial)
   4.Scheduling/ Nominations = case of physical contract -> control before physical delivery