INTERVIEW: EEX sees volatility drive trading as new members join world's biggest power exchange

New power market trading participants and new trades from the uncleared over-the-counter market are key drivers for "tremendous growth" in European forward power trading volumes after a record 2024, EEX CEO Peter Reitz told Platts in an interview.

The world's biggest power exchange added around 60 new members, ranging from algorithmic traders and commodity hedge funds to renewable power producers, including its first direct trading participant from South Korea. The shift in trading from uncleared OTC to exchange-traded and cleared transactions continued, the CEO said on Feb. 11 at the E-World trade fair.

"Volatility is another key driver for trading volumes. Depending on how some of the geopolitical risks that we're still seeing in this market play out, it could lead to additional growth stemming from uncertainty. Additionally, political decisions can also influence the volume," Reitz noted, highlighting the continuation of these trends in early 2025, with the exchange recording another 37% increase in European forward power trading volumes in January.

A record 8,439 TWh of European power derivatives were traded on EEX in 2024, up 63% year-over-year, with France seeing the most significant increase among core markets.

Germany remains EEX's biggest market, with 5,851 TWh traded in 2024, covering about 85% of the market, up from 81% in 2023.

"Algorithmic traders and commodity hedge funds, who are used to trading in other markets such as financial derivatives or oil markets, have now discovered that some power markets are liquid enough for their strategies to work there as well," Reitz said.

Nordics at crossroads

Meanwhile, EEX made only limited progress in the Nordics despite launching a new offering of zonal futures.

Reitz attributed this to market uncertainty following its withdrawal of an offer to buy Nasdaq's Nordic power trading unit, which remains the most liquid platform for the region, while Euronext offered to acquire Nasdaq's Nordic power trading business.

"Customers now have clarity. Everyone who's been on Nasdaq and has positions in the Nasdaq clearing house has to move. The so-called Nordic solution is actually an exchange based in Amsterdam and a clearing house based in Italy," Reitz said.

"That's why the Nordic market remains a focus for us in 2025. We are opening offices in Oslo, hiring new personnel on the ground, and refining our offering," the EEX CEO added.

"That is the offering, and it's clear now. Their announcement made it clear, so people now have to decide where to move their business because they have to move."

According to Reitz, potential regulatory headwinds, such as policy interventions in favor of virtual trading hubs, play only a minor role.

"I haven't met anyone yet in the market who really wants virtual trading hubs in Europe," he said.

However, Reitz acknowledged that "there's a general risk of political interference in the market, and virtual trading hubs could be one element of that. Splitting the most liquid market into several smaller price zones would be another factor that would really hurt liquidity and consequently increase the cost for the real economy to hedge their power supply."

Big in Japan

Elsewhere, EEX also registered strong growth in its Japanese power markets and for its US market offerings via Nodal, Reitz noted.

"We have seen a quadrupling of Japanese power volumes last year," he said, with January volumes exceeding 10 TWh for the first time and a new daily trading record of nearly 2 TWh on Feb. 10.

The exchange just launched trading in options for its Japanese power derivatives on Feb. 3.

Other product launches in 2025 include weekend futures for the emerging Greek power market and so-called solar peak contracts in Spain (covering Saturday and Sunday from 08:00 to 20:00), as well as the integration of the Baltic markets.

Meanwhile, in the gas market, the mix of OTC uncleared trading versus exchange trading remains different, with some of the moves away from OTC now reversed, according to Reitz noting a different gas market structure.

"But we also see that many companies which entered our gas market during the crisis continue to trade on the cleared exchange market," he said pointing at EEX strength in gas spot markets and short-term physical trading.

Energy transition

"In general, we are the enablers of the energy transition. We examine each market, and solutions can be very different," Reitz said, pointing at growth in the emerging market for Guarantees of Origin (GOs).

"GOs are a wonderful growth story. We tried it early—perhaps too early—but now we have the full value chain from [the] registry, spot market auctions, and now the futures offering, and we see a growing market in GO futures," Reitz said.

"The next German government will have to consider where to focus resources. Do we need to continue providing subsidies for solar and wind power when the market has reached a maturity where 20 years of subsidies are no longer necessary? We are advising all political decision-makers in Germany to change focus," the EEX CEO said, advocating a shift to one-off payments for the initial investment and allowing asset owners to sell output in the market.

Elsewhere, the EEX CEO said segments like green hydrogen still need support to grow, noting that Germany's import scheme H2Global is addressing this challenge with the first demand side auctions planned on EEX.

EEX EUROPEAN TRADING VOLUMES (TWh)

Source: EEX (rounded to full TWh)