European Wholesale Power Market Development

Europe's wholesale power markets are at widely differing stages of development. They range from the Nord Pool, one of the world's most highly liquid and efficient markets, down to nascent markets where liquidity is barely established. Additionally price efficiency varies widely between markets. This brief examines the current status of these markets, and also analyses their future prospects.

Report Highlights
Six European wholesale power markets are predicted to show significant development over the forecast period, with one market forecast to decline in developmental terms.

The Nord Pool market, which lies very much in the established category of wholesale market development, is the world's most liquid multi-country electricity trading market. The degree of maturity reached in the Nord Pool has been driven, at least in part, by Scandinavia's high levels of per capita power consumption.

Markets in the emerging category such as France, Belgium and Spain have all been driven, at least in part, by cross border trade flows. This has been a much stronger driver of emerging wholesale dynamics than structural developments in the market.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
A number of structural factors are required to catalyze the development of wholesale power markets 2
The development of wholesale markets tends to follow a preset pattern of distinct stages 2
The wholesale market development cycle gradually builds up enough momentum to spawn the creation of wholesale support services 3
Once sufficient structural factors are in place, the necessary support services required for wholesale market development begin to emerge 4
The market-based factors supporting hub development are crucial elements in facilitating and developing traded markets 5
Wholesale power markets are required by different players throughout the value chain for different reasons 6
There are three distinct stages to wholesale market development 7
Currently, Europe's wholesale power markets cover the full range of developmental stages 8
Europe's wholesale power markets remain at a widely different stages of development 8
Despite often having closed market dynamics in common, nascent and emerging markets differ in terms of cross-border trading 8
Nascent markets 8
Emerging markets 9
Europe's established wholesale markets are a result of ongoing liberalization and availability of supply 9
Established markets 9
Price efficiency levels in the European wholesale markets show varying ranges of volatility 10
Absolute prices show significant variation, despite following similar trend patterns 10
Price volatility in all markets has been strong 11
Datamonitor's Deviation Days Index measures price movement ranges and gives insight into levels of price efficiency 11
Levels of price volatility in the established markets have been consistently lower than the Nord Pool 12
The wholesale markets in Europe have only achieved 80% of the DDI of the Nord Pool 12
The polarization of the markets will reduce in the wake of market opening 13
Europe's power markets vary considerably in size and generation mix, which can often impact wholesale market dynamics 13
The established Nord Pool markets are much more reliant on hydropower generation than the EU 27 markets 14
The propensity for development of a wholesale market can be established from current structural factors 14
Datamonitor examines the following factors to assess wholesale market development potential by 2012:- 14
Datamonitor uses a sliding scale to assess the development in wholesale trading markets 15
Datamonitor's scoring matrix shows a broad range of development potential across the EU 16
Established markets are distributed throughout Europe 17
Seven markets are forecast to show particularly significant movement over the forecast period 18
Six markets are forecast to advance significantly over the forecast period, and one is forecast to decline 18
The projected key movements of markets in Europe by 2012 are: 18
APPENDIX 20
The criteria for scoring and the weighting assigned to them are: 20
'Current status' accounts for 10% of the overall score 20
'Per capita B2C volume' accounts for 15% of the overall score 21
'Per capita B2B volume' accounts for 15% of the overall score 21
'CAGR demand of wholesale electricity market' accounts for 10% of the overall score 22
'Wholesale fragmentation' accounts for 25% of the overall score 22
'Retail fragmentation' accounts for 20% of the overall score 23
'Potential for interconnectivity' accounts for 5% of the overall score 24
Flags of members of the European Union and the Nord Pool 25
Ask the analyst 26
Datamonitor consulting 26
Disclaimer 26
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Figure 1: The five distinct stages of wholesale market progression 2
Figure 2: Wholesale support services emerge as the cycle builds momentum 3
Figure 3: The interaction between structural and support factors creates a 'snowball' effect 4
Figure 4: The key support elements to wholesale market growth 5
Figure 5: Different players engage in wholesale trading for different reasons 6
Figure 6: The three stages of market development 7
Figure 7: Depiction of the current status of Europe's wholesale electricity markets 8
Figure 8: European wholesale power market prices 10
Figure 9: Despite brief periods of greater price efficiency, the other markets tend to show a DDI of approximately 80% of the Nord Pool 12
Figure 10: EU power generated volume by type: 13
Figure 11: The Nord Pool power generated volume by type compared with EU 27 average 14
Figure 12: Wholesale market development assessment scale 15
Figure 13: Europe's markets in descending order of development 16
Figure 14: Heat map showing wholesale power market development in Europe 17
Figure 15: Projected movement of markets by 2012 18
Figure 16: Scoring scale 20
Figure 17: Scoring scale 21
Figure 18: Scoring scale 21
Figure 19: Scoring scale 22
Figure 20: Scoring scale 22
Figure 21: Scoring scale 23
Figure 22: Scoring scale 24
Figure 23: National Flags of countries in the report 25
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