With more than 15 years of experience in energy trading in the UK, Derek Abernethy was appointed commercial director UK of APX-ENDEX in February this year. He discusses the developments of the UK power market and how APX-ENDEX is responding to these challenges by introducing new products and providing an even wider offering of services
It has been a year since the BritNed market coupling was introduced between the UK and the Netherlands. How has the year been?
Derek Abernethy, Commercial director UK: APX-ENDEX is the first exchange to bring market coupling to the UK, providing implicit auctions on both sides of the BritNed cable. This coupling has given new importance to our Power UK Day-Ahead auction by providing an opportunity to trade across borders with the wider Central Western European (CWE) region. This has resulted in traded volumes experiencing continuous growth and new members joining our exchange; we currently have 65 members. On the back of the Day-Ahead auction, we have also introduced improved services to our continuous markets, such as hourly products and reduced clip size, both of which have been well received by market participants.
With the wider market coupling of the European electricity markets coming in 2012, how will this market integration affect the UK market?
Derek Abernethy: Currently, the only market coupling solution in the UK is through BritNed. The benefits of market coupling are visible and essential for the market – price convergence, increased liquidity, robust and reliable price index and strengthened competition. BritNed coupling has brought these benefits to the market since its launch in April 2011. North West European (NWE) market coupling, due to go live in late 2012, will connect the UK market to the wider Continental European market. In practice, this means that the order books and shipping arrangements throughout the region will be integrated.
How does NWE market coupling differ from the previously established CWE market coupling?
Derek Abernethy: The NWE market coupling will replace the current Interim Tight Volume Coupling between the CWE and Nordic regions. This will result in the region having a full-price coupling.
National Grid has announced it will introduce Virtual Hub onto the UK market – what is the impact of this to the members trading at the APX-ENDEX Power UK Day-Ahead auction?
Derek Abernethy: The exchanges operating on the UK power market will remain active; Virtual Hub is not an exchange and therefore will not replace the current exchanges. Instead, it will create a shipping arrangement that allows all the exchanges and interconnectors to co-ordinate their order books and shipping arrangements and create a single reference price.
The APX-ENDEX Power UK auction will not change but will operate as does now, while the trading members on the APX-ENDEX UK Day-Ahead auction can access the same, wider pool of liquidity as all of the other parties trading on the Power UK market. Through the introduction of the Virtual Hub, APX-ENDEX is also able to increase its product offering and introduce new products on the market, such as block orders, profile block orders and smart orders.
APX-ENDEX likes to innovate and you have been the first actor on the market coupling to the UK market. What are your plans for the future?
Derek Abernethy: APX-ENDEX has always proposed new ideas aiming to facilitate the functioning and transparency of the markets through its own initiatives and from member feedback.
Over the next year we have a series of new products to launch that will aid in market development, and we have recently introduced a fee reduction until the end of the year as our contribution to the promotion of liquidity. There are also a number of systems developments that will facilitate efficient trading for our members. Furthermore, we are currently working on a solution to help the UK market participants to benefit from the capacity used implicitly to transfer Levy Exemption Certificates from the Continent to the UK.
Click here to view the article in PDF format.
More on Risk Management
ABSTRACT This paper discusses the importance of operational risk management for the efficiency of Taiwanese banks. We demonstrate that by applying risk managerial strategies banks can improve their performance,...
ABSTRACT In this paper, we propose a copula-free approach for modeling correlated frequency distributions using an Erlang-based multivariate mixed Poisson distribution.We investigate some of the properties...
This is a special issue for The Journal of Operational Risk as we celebrate our tenth anniversary. In this milestone event for our young journal I think that it would be appropriate at this time to provide...
Journal of Operational Risk, 10(1); 45-76
Sign up for Risk.net email alerts
Research chief is sceptical about end of oil indexation in European gas
Mexico's energy reform may lead to closer ties with adjacent US states
Swap dealers playing a guessing game while complying with CFTC rules
Bill Perkins believes rising demand and reduced risk warehousing will create opportunities for natural gas traders: video
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.