2013 Liquidity Report


Wholesale markets for natural gas and electricity

Liquid energy exchanges are a critical condition for well-functioning energy markets, from which consumers ultimately benefit as well. Increased liquidity raises confidence among market participants, and means that energy prices reflect supply and demand fundamentals better. In its 2013 liquidity report, ACM concludes that the wholesale market for natural gas continues to develop successfully, as it posted another increase in trading volumes and liquidity. The electricity market paints a different picture: trading volumes increased in 2012, whereas liquidity decreased. This motivates ACM to continue with its ambition to promote further market integration with neighboring countries, where policy harmonization regarding renewable energy is a key precondition to make this integration process a success.

Wholesale market for natural gas

Trading volumes and liquidity on the wholesale market for natural gas continue to grow steadily every year. The relative share of monthly contracts in the total volume has clearly increased, whereas the volume traded in standard annual contracts has remained largely stable. In addition, liquidity has improved across the board. Increased trading volumes and liquidity in products with durations of 12 months or less is a positive trend, because it means energy suppliers are better able to make natural gas purchases on the title transfer facility (TTF) that match the consumption profile of end users. At the same time, more volume and liquidity in spot contracts are needed so that energy suppliers are able to rely on the market more if they need to balance their positions in the short run. Both trends help the Dutch gas market function better. In order to increase liquidity on the wholesale market for natural gas even further, ACM aims to realize further market integration with neighboring countries.

Wholesale market for electricity

Trading volumes and liquidity on the wholesale market for electricity vary year after year. In 2012, trading volumes rebounded after the decline in 2011. On the other hand, liquidity in spot contracts decreased because of congestion on the cross-border connections. Fixed compensations for renewable electricity, and subsidies for coal-fired production in Germany have made Dutch gas plants relatively expensive. As a result, import connections are often full, thereby increasing cross-border price differences. The introduction of compensations for keeping plants available (known as capacity mechanisms) to facilitate the integration of renewable energy sources in neighboring countries may lead to additional market disruptions. That is why ACM sees policy harmonization regarding renewable energy as a key precondition for a successful integration of European energy markets.