The European Energy Exchange (EEX) will launch a wind power futures contract in the first quarter of 2016, it said on Wednesday, allowing customers to hedge risks and speculate on an increasingly important part of the electricity market.
The contract could help both wind and conventional power plants cope with the unpredictability of wind production over the course of a given month, Tobias Paulun, EEX board member in charge of strategy, said at a press conference.
Wind speeds can only be reliably forecast for a few days, exposing both parties to uncertainties.
Continental Europe’s biggest power exchange also confirmed earlier schedules for a renewable power futures contract that could act as an insurance against green energy price spikes.
“Both products are a first step by the EEX to offer the market solutions to deal with the price and volume risks arising from the growing share of renewable energy,” Paulun said.
The share of renewable power supply has risen to more than a quarter of the total in Germany, the Leipzig-based exchange’s core market, which makes energy prices increasingly weather driven.
Contracts for wind and solar power supply are new to the energy market.
Green producers for many years have been shielded from exposure to price swings because they receive fixed subsidies regardless of power demand, paid for by consumers.
Policymakers are now under pressure to treat both green and conventional energy on equal terms.
“We have the right products but their success will hinge on whether politicians really bring green power into the market,” Paulun said.
The first renewable contract, due to start trading on Sept. 14, is a cash-settled future whose payout results from the difference between hourly power prices on the EEX intraday markets and a payment threshold (“cap”) of 60 euros ($67.70) per megawatt hour (MWh).
Green producers can buy the product to guard against calm or overcast weather, protecting themselves against failure to fulfil delivery obligations, while fossil fuel plants can lock in a premium for taking on the risk of the cap being exceeded.