Europex - Association of European Energy Exchanges reposted this
⚠️ The European Commission will assess the possible introduction of regional Virtual Trading Hubs (VTHs) for cross-zonal hedging, and the moving from zone-to-zone to zone-to-hub long-term transmission rights (LTTRs) to improve the market participants' ability to hedge price risks in the internal #electricity market - but are these measures feasible? Together with Energy Traders Europe and Eurelectric, we advocated for a cautious approach and the need for a thorough data-driven evaluation before any changes are implemented. Compass Lexecon's study provides a detailed quantitative analysis focusing on transaction costs and basis risks in the CORE region and its extension to Iberia and Italy. It shows that: ▪️ The current system across the CORE region where market participants hedge using existing physical hubs like those in Germany and Hungary is generally more effective for hedging than a virtual hub setup. ▪️ If implemented, VTHs could fragment forward market liquidity, leading to lower efficiency on the market and higher costs, which may eventually be passed on to consumers. ▪️ The introduction of zone-to-hub LTTRs does not seem sufficient to counterbalance less efficient hedging on VTHs. Download the study to learn more: https://lnkd.in/eqgSBBGM #energy #electricity #MarketDesign #EMD #hedging
