The core business of EPEX SPOT consists in operating a power exchange for the German, French, British, Dutch, Belgian, Austrian, Swiss and Luxemburgian markets.

It provides a market place where exchange members send their orders to buy or sell electricity in determined delivery areas. The role of EPEX SPOT consists in matching these orders in a transparent manner, according to the public Exchange rules which among others describe the priorities and algorithms used for the matching of the orders. As a result of the order matching, EPEX SPOT produces trades which are legally binding agreements to purchase or sell a determined quantity of electricity to a defined delivery area for the matched (or “cleared”) price. This price is never higher than the purchase price fixed by the buyer or lower than the sale price offered by the seller. The trades are immediately transferred to the central counterparty, the European Commodity Clearing (ECC), which becomes the counterparty to the buyer and to the seller who do not know each other. ECC takes the obligations of the buyer (to pay for the electricity) vis-à-vis the seller, and of the seller (to deliver the electricity) vis-à-vis the buyer. It nominates the exchange of energy to the relevant Transmission System Operator responsible for the delivery area and calls for the money pertaining to the trade from the buyer and hands it over to the seller.

This process guarantees:

• fair and orderly execution of the orders of the exchange members,
• secure delivery and payment of the trades,
• anonymous transactions.

As an important result of this process, EPEX SPOT broadcasts the prices resulting from the trades. Since the trades result from a large, open and transparent competition between the orders of the exchange members, they reflect the best information available at the time on the market conditions. They are hence the most reliable prices available for the short-term electricity, either day-ahead for the day-ahead auctions or intraday for the continuous intraday trading.

These prices serve as a benchmark for the transactions of the wholesale market. As depicted in the diagram, after the liberalisation of the electrical markets in Europe, the trade of power has become a key component of the sector next to the production, transmission, distribution and consumption of power.

The free trade of power thus insures competitive prices for the end consumers which have the freedom to choose between numerous suppliers. Independently of the production facilities that the suppliers may or may not have, they are dependent on the wholesale market to deliver the supply of power to their consumers. Moreover, since power cannot be stored, all users of the transmission grids must be balanced in real-time between their resources and consumption of power.

EPEX SPOT provides a critical liquidity outlet for the producers, the suppliers and the transmission system operators, as well as for the industrial consumers, to fulfill their sales or their purchases in short term power. Meeting these needs balances supply and demand, generating relevant prices for short term power.

 

Learn more about the history of EPEX SPOT and the development of power markets on the next page.