European Wholesale Power Markets: Current Status and Future Trends

The various wholesale power markets in Europe are at widely differing stages of development. They range from the Nord Pool which is one of the world's most highly liquid and efficient markets down to various nascent markets where liquidity is barely established. This brief examines the current status of these markets and also highlights how they are likely to develop over the coming five years.



Report Highlights
In eastern European, current levels of wholesale power market liquidity are extremely limited, though have considerable growth potential. In Western Europe the already well established nature of wholesale power in various markets creates less scope for liquidity growth.


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CATALYST 1
SUMMARY 1
ANALYSIS 2
Eastern Europe has the greatest scope for wholesale market growth 2
Incumbents should prepare for the arrival of 'genuine' wholesale competition 2
Central and Eastern Europe is yet to embrace forward trading activity 3
New member states have the greatest upside potential for liquidity growth 4
Romania's emerging wholesale market will set the tone for Eastern Europe 5
Western Europe must address notable wholesale market impediments 6
Vertically integrated utilities provide a key obstacle to wholesale competition 6
Auctions are not an effective mechanism for stimulating liquidity growth 7
Wholesale power liquidity across Europe's major power markets has stagnated 8
Wholesale liquidity varies markedly in volume and type across Europe 9
Financial institutions are increasingly pivotal actors in established power markets 9
Ownership unbundling would be keenest felt by German utilities 10
Nascent electricity markets will be the key targets for Europe's leading utilities 11
Key structural factors are required to catalyse wholesale development 12
Wholesale markets tend to follow a preset pattern of development 12
Cyclical wholesale market development spawns support services 13
Support services then reinforce the cycle to fuel liquidity growth 14
Support elements are crucial in driving wholesale market maturity 15
Motivations to trade wholesale power differ along the value chain 16
APPENDIX 17
Thirteen European wholesale power markets are assessed in this brief 17
Incumbent dominance continues to hamper liquidity in the Austrian wholesale power market 17
Czech wholesale power trading centres on system balancing 18
Wholesale trade in the import dependent Dutch power market is closely tied to neighbouring Germany 19
EDF's dominance and subsequent influence on virtual power plant auctions creates a volatile French wholesale sector 20
Germany's wholesale power market is yet to fully establish itself due to ongoing network access issues that limit competition 21
Italian spot wholesale power trading has witnessed significant growth since its introduction 22
The Nord Pool exchange is Europe's largest and most successful multi-national wholesale power market 23
Polish wholesale power trading centres on system balancing 24
Portuguese forward wholesale power trading is set to receive a boost from the creation of an Iberian electricity market 25
Romanian wholesale power liquidity has received a boost from the arrival of new market entrants 26
Slovenia is failing to embrace wholesale electricity trading 27
Market impediments continue to hamper Spanish wholesale power trading from realising its potential 28
UK wholesale power market liquidity is showing signs of recovery 29
This brief contains a number of industry standard terms 30
Datamonitor offers bespoke services that can be tailored to supplement your understanding of the European utility market 30
This analysis builds on a variety of external data sources in addition to existing Datamonitor content in the wholesale arena 31
The MCI draws on nine underlying metrics grouped into three broad clusters: Market framework; Supplier Push; Customer Pull 32
'Wholesale Market Fragmentation' accounts for 10% of the overall score and is one of the three Supplier Push pillars 33
'Traded Market Maturity' accounts for 20% of the overall score and is one of the three Supplier Push pillars 34
Disclaimer 34

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Figure 1: Eastern European wholesale power activity is predominantly 'spot' orientated 3
Figure 2: The East-West divide in wholesale power market maturity 4
Figure 3: Eastern European wholesale market competitive intensity 5
Figure 4: French wholesale liquidity dramatically lags its neighbouring power markets 7
Figure 5: Trading activity in Europe's largest power markets is failing to take-off 8
Figure 6: Western Europe's major utility players are targeting further eastward expansion 11
Figure 7: The five distinct stages of wholesale market progression 12
Figure 8: Wholesale support services emerge as the cycle builds momentum 13
Figure 9: The interaction between structural and support factors creates a 'snowball' effect 14
Figure 10: The key support elements to wholesale market growth 15
Figure 11: Different players engage in wholesale trading for different reasons 16
Figure 12: Austrian wholesale power market 7
Figure 13: Czech wholesale power market 8
Figure 14: Dutch wholesale power market 9
Figure 15: French wholesale power market overview 20
Figure 16: German wholesale power market overview 21
Figure 17: Italian wholesale power market overview 22
Figure 18: Nordic wholesale power market overview 23
Figure 19: Polish wholesale power market overview 24
Figure 20: Portuguese wholesale power market overview 25
Figure 21: Romanian wholesale power market overview 26
Figure 22: Slovenian wholesale power market overview 27
Figure 23: Spanish wholesale power market overview 28
Figure 24: UK wholesale power market overview 29
Figure 25: Market Competitive Intensity pillars 32
Figure 26: Wholesale Market Fragmentation scoring breakdown 33
Figure 27: Traded Market Maturity scoring breakdown 34
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