Energy Stock Market

presentationUp until recently, in most EU countries (Greece included), power supply was a physical monopoly, thus the establishment of a state or state-controlled administration department that would be responsible for producing, transferring and distributing, was justified. However, the advancement to more loose economic competition models has signified the cease of this physical monopoly, as far as the production and the distribution of energy are concerned.

In turn, the liberation of the Power Market has given room for the development of Open Markets, where participants are able to choose between different energy products in different periods of time and may negotiate on their “folder of products”. These folders can be negotiated under three different schemes:

  • The Long-term Market, where participants come to direct agreements in form of long-term contracts.
  • The Day-ahead Market, where buyers place their bids in 24 hourly auctions, in order to establish a contract for the next day.
  • The Real-time Market, where buyers place their bids in order to establish a contract for the next hour.

Due to the physical model of the energy production-distribution-consumption network, long-term and day-ahead markets are the most dominant ones. Nevertheless, the inability to store Power for long periods of time, dictates the development of a mechanism that can efficiently balance the supply and demand of Power and can be easily and constantly controlled. The administrator of each Power system is responsible for ensuring this balance between production and consumption, through the utilization of a Real-Time Market. The Real-Time Market model bears the highest risk for the participants, since the malfunction of an Electric node or the shutting down of a Power line can bring exaggerated rising or falling of the prices. Nevertheless, its existence is decisive for the coverage of Demand, in case the other two Markets do not provide enough Power. Additionally, one should keep in mind that high risk also implies high profit maximization for players willing to participate.