2014 Liquidity Report wholesale markets for natural gas and electricity


The 2014 Liquidity Report offers an overview of the trends in liquidity on the wholesale markets for natural gas and electricity in the period of 2009-2013.

Volumes on the wholesale markets for natural gas and electricity continued to increase in 2013. Combined with positive trends of other liquidity indicators such as less price volatility and a small bid-ask spread on the different trading hubs, liquidity on these markets appears to be increasing. On both wholesale markets, the increases in volume can be explained by the increase in traded volumes of term products. For natural gas, quarterly and seasonal products in particular have increased, while for electricity, it has been annual, quarterly and monthly products in particular. Higher volumes and improved liquidity help the wholesale markets function better, and enable market participants to make efficient decisions when buying or selling natural gas or electricity.

With regard to the gas wholesale market, it is striking that the traded gas volume of day-ahead contracts on the ICE ENDEX trading exchange dropped by half in 2013. As the questionnaire revealed that the total traded volume at TTF on the exchanges has risen, it could also mean that the exchange trade in day-ahead contracts has moved (perhaps temporarily) to other exchanges such as EEX. Higher volumes and liquidity in day-ahead (and within-day) contracts are desirable for an improved functioning of the wholesale markets, since market participants themselves are responsible for their financial positions. On June 1, 2014, the balancing regime in the Netherlands was changed. Transmission system operator GTS now executes its balancing activities through ICE ENDEX’s within-day market. The expected additional trade in within-day contracts resulting from this change may increase the liquidity of trade on ICE ENDEX. First figures of June and July 2014 indeed show an increase of volumes of within-day contracts on ICE ENDEX.

With regard to electricity, there are two interesting observations. First, the resilience analysis of simulated bids on the APX day-ahead market revealed that, with simulated additional demand, the price has risen considerably in the past three years. Based on the findings of this resilience analysis, market depth of the day-ahead market thus seems to be decreasing. The reason behind this is likely to be found in the more expensive generation units being taking off the market (temporarily). In the simulation, this results in a situation where, with additional demand, the more expensive bids must be selected. This is an indication of a well-functioning European market in which overcapacity in the Netherlands cannot compete with capacity abroad and/or is unable to set the price in the Netherlands. The second interesting observation is that the number of transactions in products has more than doubled compared with 2012. Improved insight in the portfolio and the forecast of market participants after the day-ahead market is closed has resulted in more intraday transactions, most of which are cross-border transactions. 

For the further development of liquidity on the wholesale markets for natural gas and electricity, ACM will continue to focus on further market integration with neighboring countries.

The report is partly in English and Dutch. The preface, summary and figures are in English.