Svenska kraftnät extends the pilot for auctions of hedging products
Svenska kraftnät and Svensk Kraftmäkling (SKM) have agreed to extend the auctions of hedging products until 2024. The agreement provides for an extension of the pilot project for next year. The extension is valid until 31 December 2024 at the latest.
Since February 7, 2023, Svenska kraftnät has arranged auctions of EPAD contracts, which are performed by SKM on behalf of Svenska kraftnät. The auctions are conducted as a pilot project initiated by Svenska kraftnät with the aim of supporting the functioning of the market in a new way in accordance with the commission regulation Forward Capacity Allocation (FCA).
The overall goal of the measures is to increase the liquidity in the long-term market. The auctions have functioned well and they have been met with great interest and positive reactions from the market, which is why Svenska kraftnät has decided to continue the auctions in the bidding zones SE2, SE3 and SE4.
In June 2023, EEX and Nasdaq informed the market about the intention for EEX to buy Nasdaq's European power trading and clearing business. The transaction is currently subject to regulatory approval, but if it goes through, changes to the existing Nordic market are expected. Among other things, a delisting of EPADs from the product portfolio is planned.
Svenska kraftnät can only offer contracts that are listed on the open financial market. If EEX decommissions EPADs in 2024, Svenska kraftnät’s intention is to continue the auctions with another standardized product. However, before deciding to do so, an assessment is needed of whether the pilot's auctions can be adjusted and continued, or if the auctions should be terminated before the end of 2024.
The forward hedging market should ensure that there is an opportunity to hedge the price risks that the physical trade in electricity entails. As Transmission System Operator, Svenska kraftnät shall promote liquidity and the functioning of the forward market and, if necessary, introduce measures to ensure that the hedging opportunities are sufficient. The pilot project is part of Svenska kraftnät's work related to the Commission Regulation FCA and parallel work is ongoing with method development linked to articles in FCA.
More information about the pilot project, summaries of the auctions, trading rules and so forth can be found on the page Pilot project: support for increased hedging opportunities in the Swedish electricity market.
Contact: linnea.nyman@svk.se