January 29, 2016 / 3:37 PM / 4 years ago

Europe's exchanges vie for dominance of wind power futures

* Nasdaq eyes expansion of wind products to Britain, Denmark

* EEX to launch wind products in Spring

By Susanna Twidale

LONDON, Jan 29 (Reuters) - Two of Europe’s major energy exchanges are poised to battle for dominance in the market for wind power futures, entering a space previously controlled by insurance companies.

Wind power contributes around 12 percent of Germany’s electricity, providing a challenge for generators and power traders who can be adversely affected by both too much and too little wind causing inconsistent output.,

Nasdaq Commodities, a trading arm of U.S. group Nasdaq , launched German wind power futures products in December linked to a wind index which calculates wind strength.

“It’s a market that has to develop but there are 40 gigawatts of installed wind capacity in Germany so there is big potential,” said Konstantin Lenz, Country Manager Commodities Germany at Nasdaq Commodities.

EEX, majority-owned by Deutsche Boerse, has also spotted the potential and will launch its own German/Austrian wind power futures this spring.

“These are cross-commodity tools for anyone affected by the impacts of either too much wind, reducing demand for conventional generation, or not enough wind if you are counting on wind production,” said Maximilian Rinck, Power Expert at the Business Development Team of EEX.

Both companies hope to use the products as a springboard to other European markets.

“The UK is definitely on our list but also maybe Denmark and Spain,” said Nasdaq’s Lenz. EEX’s Rinck said his company could also launch wind products in other regions.

Both Nasqaq and EEX said it was difficult to put a figure on the size of the European wind power market but both believe the potential could be huge.

Around 10 percent of Europe’s electricity comes from wind which could rise to 25 percent by 2030, according to the European Wind Energy Association lobby group.

Insurance firms have offered tailored wind hedging products for several years, but welcomed the new contracts.

“We don’t see it as a threat,” said Ralf Hungerbuehler, Senior Originator Weather & Commodity Risks at insurance firm Munich RE.

“The difference is really the complexity and the bespoke nature of what is being offered. An exchange has a more off -the-shelf approach and cannot offer every variable a client might want,” he said.

“Power traders will most likely use wind futures to manage shorter-term daily and weekly positions. The insurers will be interested in longer dated structures from several weeks to years,” said Ralph Renner, Head of European Origination at insurance firm Endurance.

CME Europe, a subsidiary of CME Group offers European products to hedge against temperature risks, but declined to comment on wind futures. Intercontinental Exchange does not have any specific weather products in Europe.

ICE “continually evaluates new opportunities to deliver value to customers”, a spokeswoman for ICE said, but declined further comment. (Reporting By Susanna Twidale, editing by David Evans)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below