Svenska kraftnät publishes full-year follow-up of EPAD auctions
Svenska kraftnät today publishes an in-depth analysis of the pilot auctions of EPAD contracts conducted during 2023. In addition to an analysis of the price formation in the auctions, the report also contains a commentary of the results of a survey, which Svenska kraftnät undertook with market participants in February 2024.
Svenska kraftnät's pilot project involves the auctioning of financial contracts, Electricity Price Area Differentials (EPADs), which are used for hedging specific bidding zone risk. The aim of the pilot project is to test a new way for a TSO to increase liquidity in the forward market through the use of exchange-traded contracts.
Svenska kraftnät has previously published four quarterly follow-ups primarily for descriptive purposes. The full-year report serves as an in-depth analysis and complements previous follow-ups. A majority of the market participants that responded to the survey have also participated in Svenska kraftnät's auctions.
The report draws the following conclusions:
- The auction model is considered to have worked well and the auctions contribute to increased transparency and better price formation in the EPAD market.
- The market participants themselves are generally satisfied with the auctions, but see some potential for improvement.
- Participation in the auctions is assessed as satisfactory, but with some elements of market concentration.
- Price formation in the auctions has been satisfactory. However, it is noted that this has not worked as well in the auctions of monthly contracts as, for example, the calendar year contracts.
- Liquidity and turnover in the continuous market for the EPAD contracts included in the auctions show an improvement compared to other EPAD contracts. Moreover, this trend has been accentuated in the first quarter of 2024.
The full-year report including questionnaire responses: Follow-up EPAD auctions full year 2023 (.pdf) Opens in a new window.