Power exchange trial run gives traders taste of the real thing
Traders on the Polish Power Exchange (GE) bid for electricity at prices well below those producers pay distributors during its first five days of test trading last week.
The dry run precedes an official July 1 opening and is intended to familiarize traders with the exchange. Its supervisory board expressed satisfaction with first-day results at a press conference last Monday.
"I think just with this first session it has been proven that it works," said the board's president, David Hunter.
The average daily price stood at zl. 83.99 per megawatt hour (MWh), in contrast to the zl. 115 that power distributors paid producers at the end of the first quarter. Six of Monday's 14 signed participants traded 4,867 MWh, which ranged in price from zl. 80-zl. 91.50 per MWh.
"I think the levels of participation and volume already in the first trading session indicate that the power exchange is going to be a very successful device of not only liberalizing but reducing the cost of electricity in Poland in the not too distant future," Hunter said. "We have now more participants than in the Amsterdam power exchange and they have been in operation for more than one year."
By Thursday, 16 companies were registered to make spot transactions on the market, which operates a day in advance, and trade volume stood at 25,526 MWh for that day's session at an average price of zl. 77.50, 33% below producers' going rates.
But a source close to the power exchange said that despite everything going according to plan, the real test for the exchange will be July 1 when energy is traded for hard currency.
The exchange is 30% owned by the state treasury with 10% stakes owned by Elektrim, the Warsaw Stock Exchange (WSE), the Polish Power Grid (PSE) and Endesa, Spain's largest electricity producer and the former employer of the exchange's president, Javier Alonso.
Similar exchanges operate in Scandinavia and the Netherlands, and an U.K. one opened for trade two weeks ago. Hunter said he expects Poland's exchange to become one of the most successful in Europe within the next year.
The exchange will also have futures and options trading, but for the moment traders will only be able to enter transactions running a day ahead of delivery, though they may place sale and purchase bids up to six days in advance of a session. Prices are determined on an hourly basis against a supply and demand curve.
Those eligible to trade on the exchange include 36 electricity generating companies, 33 distributors, 180 major consumers of electricity and brokers with licenses to trade energy. Minimum order sizes have been set at 100 kilowatt hours (KWh) and will be handled electronically, mostly over the internet.
Rybnik, Poland's sixth-largest power plant, was the first company to sign a participation agreement with the energy exchange on June 1. The list now includes an additional 15 energy producers and distributors across the country.
