40 European companies, along with ParisBourseSBF SA and its partners, have met on Wednesday, April 12, and have been invited to participate in feasibility studies regarding the design of a voluntary physical power exchange in France, as well as the development of financial instruments meeting the needs of participants in the French power market.
These studies will be completed by the summer 2000. They are aimed at developing market responses that are compatible both with the legislative and regulatory framework in France as a result of the February 10, 2000 law, and with the structure and the economics of the French electricity industry.
Once the studies have been completed, a Steering Committee, bringing together the representatives of ParisBourseSBF SA and its partners, will consider the attractiveness of a European Exchange on economic, technical and financial terms.
The opening of a European power market has fostered the emergence of wholesale power markets, involving major generators, traders, and suppliers . Indeed, these Power Exchanges greatly help to structure the commercial relationship between energy actors.
Following the implementation of the European Electricity Directive in the French law, many major power market players in France have been looking into the possibility of setting up a voluntary wholesale power exchange. At the crossroads of key European power transmission lines and flows, France enjoys a particularly favorable position.
Regardless of the possibly limited share of total generation that could be traded, the existence of an organized and transparent physical market would allow end-users to benefit in France from a diversity of short-term power supplies, while generators would have additional trading opportunities. Generally speaking, an organized physical market would provide wholesale participants with local access to a wider range of generators and intermediaries.
The involvement of the French and Belgian Transmission System Operators in the ParisBourseSBF SA European Energy Exchange project is vital to its success. Other European experiences show that an appropriate coordination between market operators and Transmission System Operators is key to efficient market operations. Information flows between the two players, as well as a clear-cut definition of their respective roles will enable them to properly meet their requirements, for the benefit of all European Electric System players.
Launching such a power exchange would foster price transparency and anonymous trading, thus creating benchmark prices to provide participants with guidance for their industrial activities.
The existence of a transparent reference price will also enable a traded market for financial derivatives, thereby providing industry players with hedging instruments and improving liquidity.