The power derivatives market is unlike most other derivatives markets. Some of the reasons for this stem from its fragmented nature, as infrastructures and fundamentals vary widely between EU member states. Siân Williams casts light on this fragmented and complex commodity market and asks if consolidation is on the cards – and what has been keeping it for so long.
Power is an inherently regional product which is driven by local fundamentals. Different regions are subject not only to different weather patterns and industrial cycles, and therefore varied supply and demand, but also to different generation types, which means that changes in the price of fuels have stronger effects on some countries’ power prices than on others.
Each European member state also has different infrastructures for distributing power, which makes contract fungibility across borders much trickier.
So, it is understandable that the number of power exchanges in...