Abstract
This paper deals with basic characteristics and features of trading in electricity, especially in cross-border trading. First, the most important features of electricity as a commodity are explained, with the consequences for electricity trading. Then characteristics and changes in the electricity market after liberalization are discussed. This liberalization has taken place throughout Europe, and the consequences of this revolutionary change are still visible. The main features of electricity trading are mentioned in general. Then cross-border trade in Europe is discussed in greater detail. In this context the basic principles of the allocation of cross-border transmission capacities are explained.The next part of the paper considers the characteristics of the European electricity market from the trader’s point of view. Liquidity as a very important index is introduced here.Finally the most visible trends in cross-border trade and the most probable future development in this area are presented.
Highlights
This paper deals with basic characteristics and features of trading in electricity, especially in cross-border trading
There are some standards for electricity trading [1]
Cross-border trade electric power in Europe is enabled by integration of the countries into UCTE (Union for the Coordination of Transmission of Electricity)
Summary
The electricity market is determined by the main characteristic of electricity i.e., that it cannot be stored. SB buys the electricity at the lowest cost from the producers and it sells this electric energy on to customers The disadvantage of this model is the exclusive privilege of the one and only subject for purchasing the electric energy. - rTPA (Regulated Third Party Access): This assumes bilateral contracts between market subjects (producers, traders and customers) for energy retail on condition of regulated prices. The existence of a regulatory authority is assumed at the same time This authority designates prices in non-liberalized segments of the power industry. Due to the impossibility of storing electric power, its price is highly volatile on spot markets (Fig. 1.), and this forces investors to use some form of hedging (risk management). The use of derivates (futures, forwards) is in the power industry very common. (Experience from long term liberalized markets shows that derivates reduce spot prices [2].)
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