The next steps of the Hellenic Energy Exchange

The last few years have evidently been characterized by an ongoing crisis management for the energy sector. A crisis that put the resilience of the industry to the test and posed enormous political and social challenges for all of the EU countries.

Organized energy markets across Europe play a significant role in the stability and balance of supply. Energy exchanges, including the Hellenic Energy Exchange, contribute to the creation of an EU internal energy market, as they allow the smooth trade and flow of energy (power and gas), across Europe. They allow companies wishing to generate Renewable Energy Sources (RES) to access the market and sell green energy on the exchange.

The situation would have been completely different today if there were no organized markets, where the market participants could not exchange energy through standardized products and transparent prices, with the security offered by the clearing houses. The uncertainty prevailing in today's markets, coupled with the lack of trust between counterparties, would have had a much more negative effect if these transactions were to be carried out outside of regulated markets, on what are known as OTC (over-the-counter) markets. Those transactions would be based on bilateral contracts only, which can lead to a series of problems including price opacity, poor risk management, etc.

Over the last five years, the Hellenic Energy Exchange has contributed to the shaping of an organized energy market in Greece. It has managed to develop well-functioning and established power and gas markets in the country, safeguarding transparency, equal access for all market participants, and ensuring low transaction costs.

Our next steps aim at making Greece and its energy exchange, a central trading hub in the Southeastern European region, in collaboration with our partners. We ultimately aim at increasing our liquidity and expanding market participation – which in turn will increase market maturity, resilience to price volatility, and speculation. We intend to reach this goal through targeted actions.

The Hellenic Energy Exchange to run a Natural Gas Trading Hub with benchmark prices for the Southeastern European markets.

We strongly believe that natural gas and the Natural Gas Trading Hub will continue to lead in the next phases of the energy transition. We prioritize the growth of the Natural Gas Trading Hub with products and services that will significantly enhance the appeal of the Greek Natural Gas market, and attract more companies, so to increase the trading volumes which will lead to higher market liquidity and maturity.

In this context, we are considering the development of new products (Gas Futures), the expansion of participation on the trading hub for companies that are not users of the National Natural Gas Transmission System (NNGTS), along with the simplification of registration procedures. Our efforts are focused on making gas prices of the Greek Energy Exchange a benchmark for the Balkans and Southeast Europe. Το achieve this, we have initiated partnerships with data providers widely distributed in Europe.

Investing in power derivatives and the spot electricity market

We are working to improve and develop the existing power derivatives market of the Energy Exchange. This is a market with a high potential, which is already being utilized in Europe for price hedging. We are considering the development of short-term power derivatives products, which will enrich the toolbox for energy companies in terms of volatility management. Short-term products involve lower risk than the existing long-term ones, and in this way the management of a company's energy portfolio becomes more affordable and financially efficient.

In addition, following the successful launch of the continuous trading intraday market, we are focusing on the additional development of the spot electricity market, integrating the demand response mechanism, exploring the introduction of 15-minutes products, and working on the expansion of intraday auctions from a regional to a pan-European level. The spot electricity market is the cornerstone of the wider European electricity market, and that is why we continue to invest in its further expansion.

PPAs: Working on the development of a centralized platform which will facilitate agreements

Market interest for PPAs has grown very much in recent years. PPAs are contracts between off-takers and RES producers/developers. A new focus on PPAs stems from Europe’s priority to develop the renewable energy market solely on market terms, whilst the recent price volatility has led the industry to request long-term energy supply, at fixed prices, with lower volatility risk.

Relevant agreements have always been challenging to conclude; especially due to the cost of the financial tools and guarantees requested for such contracts (margins, financial costs, collaterals, etc.). If we want to successfully promote PPA contracts, we need to take initiatives.

Taking into consideration the above, the Hellenic Energy Exchange is exploring the creation of a PPA platform where interested parties will be able to find “buy” and “sell” PPA bids on a single platform. To this effect, the Hellenic Energy Exchange has launched a consultation with all interested market parties, through a detailed questionnaire to determine the specific needs and preferences of the industry.

We are very pleased with the feedback, as a significant number of stakeholders have gotten back to us. The next steps include the assessment of the results of the consultation, determining the high-level market design, and reporting to our Regulatory authority (RAAEY).

It is interesting to note that policies favorable towards PPAs have already been implemented in other European countries. PPA platforms can offer a standardized framework, including specific bidding processes (such as auctions), which are expected to facilitate the conclusion of such contracts. However, as already mentioned, due to the large quantities of energy traded through PPAs, the need for guarantees is high and costly. Potential support could come from the state, which could act as a guarantor, especially in cases of PPA agreements among small and medium size companies.

The geopolitical developments in recent years have proven that taking the initiative with immediate actions and quick reflexes is essential. In the right conditions, we can create significant benefits not only for the Greek energy market but for the entire Southeastern European region, as well. The Hellenic Energy Exchange utilizes and will continue to use its expertise and corporate governance, to seize the opportunities ahead and evolve into an energy hub for Sοutheastern Europe and the Balkans.

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* Alexandos Papageorgiou is the CEO of EnExGroup

Disclaimer: "The contents of this article are the author's sole responsibility. They do not necessarily represent the views of the Hellenic Association for Energy Economics or any of its Members".