N2EX May Start First UK Power Spark, Gas Auctions in 2011
Nasdaq OMX Group Inc. (NDAQ) and Nord Pool Spot AS’s N2EX exchange in the U.K. may start daily auctions of natural gas and spark spreads, or simultaneous power sales and fuel purchases, earlier than planned.
The two auctions had been planned to start at the turn of the year and would complement the exchange’s day-ahead power auction that began in January, Geir Reigstad, a senior vice president at Nasdaq OMX in Oslo, said yesterday in a telephone interview. The spark auction would be the country’s first.
Nasdaq and Nord Pool won a 2008 competition held by Britain’s Power Trading Forum , whose members include Merrill Lynch & Co. and Barclays Capital , to help design a market to boost trade of U.K. electricity. It beat offers from European Energy Exchange AG, continental Europe ’s biggest energy-trading platform, and ICE Futures Europe, the biggest U.K. gas market.
“N2EX’s market council said they will accelerate the process to start the auctions,” Reigstad said. The market council is an advisory body made up of members of the exchange.
The Power Trading Forum’s plan included starting the three auctions in the U.K., Reigstad said. These prices would create a reference to build a futures market based on the spark-spread index, he said.
Credible ReferenceTotal Gas & Power Ltd. and BP Gas Marketing Ltd. became members of N2EX this month, joining companies including Barclays Plc, JPMorgan Chase & Co., RWE AG, EON AG and Electricite de France SA. Physical buyers and sellers of natural gas, as well as power, will be needed to create a credible reference price, Reigstad said.
“There must be a number of sellers and buyers in the market,” Reigstad said. “We will have enough members on board to get the proper indexes.”
Low liquidity for future U.K. power contracts has been blamed for stifling competition and blocking new companies from entering the market. Liquidity can be measured by comparing the amount of electricity bought and sold with a country’s consumption. In Germany, 9.4 times electricity demand was traded last year, London-based consultant Prospex Research Ltd. said this month. The same number for the U.K. was 3.6 times consumption.
RWE, EON and EDF are among companies that generate and supply electricity in the U.K. Most trading is done via brokers such as Spectron Group Ltd. and GFI Group Inc. rather than on exchanges. Sparks trades are the most popular for power.
Market Council Nordpool - News
It beat offers from European Energy Exchange AG, continental Europe's biggest energy-trading platform, and ICE Futures Europe, the biggest UK gas market. “N2EX's market council said they will accelerate the process to start the auctions,” Reigstad said
Norway, Sweden, Denmark, Finland and Estonia are represented on the council and Antti Paananen, director general of the Finnish Energy Market Authority, was elected chairman, the Oslo-based exchange said yesterday on its website.