European Wholesale Power Market Development

• A detailed review of the levels of development and liquidity currently prevailing in Europe's wholesale power markets.
• Insight into how the relative positioning of each of these markets is likely to change in the period to 2012.
• Knowledge of the factors driving wholesale market development and the associated factors supporting market efficiency.
• Forecasts of liquidity development in individual markets over the period to 2012.

Six European wholesale power markets are predicted to show significant development over the forecast period, with one market forecast to decline in developmental terms.

The Nord Pool market, which lies very much in the established category of wholesale market development, is the world's most liquid multi-country electricity trading market. The degree of maturity reached in the Nord Pool has been driven, at least in part, by Scandinavia's high levels of per capita power consumption.

Markets in the emerging category such as France, Belgium and Spain have all been driven, at least in part, by cross border trade flows. This has been a much stronger driver of emerging wholesale dynamics than structural developments in the market.

Reasons to Purchase


• Gain an understanding of current and future wholesale power procurement options in the newly liberalised European Electricity market.
• Understand the degree to which individual wholesale power markets are efficient at conveying pricing signals.
• Track the likely development of European wholesale liquidity and the resultant opportunity for efficient wholesale power trading.

DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

A number of structural factors are required to catalyze the development of wholesale power markets

The development of wholesale markets tends to follow a preset pattern of distinct stages

The wholesale market development cycle gradually builds up enough momentum to spawn the creation of wholesale support services

Once sufficient structural factors are in place, the necessary support services required for wholesale market development begin to emerge

The market-based factors supporting hub development are crucial elements in facilitating and developing traded markets

Wholesale power markets are required by different players throughout the value chain for different reasons

There are three distinct stages to wholesale market development

Currently, Europe's wholesale power markets cover the full range of developmental stages

Europe's wholesale power markets remain at a widely different stages of development

Despite often having closed market dynamics in common, nascent and emerging markets differ in terms of cross-border trading

Nascent markets

Emerging markets

Europe's established wholesale markets are a result of ongoing liberalization and availability of supply

Established markets

Price efficiency levels in the European wholesale markets show varying ranges of volatility

Absolute prices show significant variation, despite following similar trend patterns

Price volatility in all markets has been strong

Datamonitor's Deviation Days Index measures price movement ranges and gives insight into levels of price efficiency

Levels of price volatility in the established markets have been consistently lower than the Nord Pool

The wholesale markets in Europe have only achieved 80% of the DDI of the Nord Pool

The polarization of the markets will reduce in the wake of market opening

Europe's power markets vary considerably in size and generation mix, which can often impact wholesale market dynamics

The established Nord Pool markets are much more reliant on hydropower generation than the EU 27 markets

The propensity for development of a wholesale market can be established from current structural factors

Datamonitor examines the following factors to assess wholesale market development potential by 2012:-

Datamonitor uses a sliding scale to assess the development in wholesale trading markets

Datamonitor's scoring matrix shows a broad range of development potential across the EU

Established markets are distributed throughout Europe

Seven markets are forecast to show particularly significant movement over the forecast period

Six markets are forecast to advance significantly over the forecast period, and one is forecast to decline

The projected key movements of markets in Europe by 2012 are:

APPENDIX

The criteria for scoring and the weighting assigned to them are:

'Current status' accounts for 10% of the overall score

'Per capita B2C volume' accounts for 15% of the overall score

'Per capita B2B volume' accounts for 15% of the overall score

'CAGR demand of wholesale electricity market' accounts for 10% of the overall score

'Wholesale fragmentation' accounts for 25% of the overall score

'Retail fragmentation' accounts for 20% of the overall score

'Potential for interconnectivity' accounts for 5% of the overall score

Flags of members of the European Union and the Nord Pool

Ask the analyst

Datamonitor consulting

Disclaimer

List of Figures

Figure 1: The five distinct stages of wholesale market progression

Figure 2: Wholesale support services emerge as the cycle builds momentum

Figure 3: The interaction between structural and support factors creates a 'snowball' effect

Figure 4: The key support elements to wholesale market growth

Figure 5: Different players engage in wholesale trading for different reasons

Figure 6: The three stages of market development

Figure 7: Depiction of the current status of Europe's wholesale electricity markets

Figure 8: European wholesale power market prices

Figure 9: Despite brief periods of greater price efficiency, the other markets tend to show a DDI of approximately 80% of the Nord Pool

Figure 10: EU power generated volume by type:

Figure 11: The Nord Pool power generated volume by type compared with EU 27 average

Figure 12: Wholesale market development assessment scale

Figure 13: Europe's markets in descending order of development

Figure 14: Heat map showing wholesale power market development in Europe

Figure 15: Projected movement of markets by 2012

Figure 16: Scoring scale

Figure 17: Scoring scale

Figure 18: Scoring scale

Figure 19: Scoring scale

Figure 20: Scoring scale

Figure 21: Scoring scale

Figure 22: Scoring scale

Figure 23: National Flags of countries in the report