Electricity forward and futures markets (The Energy Academy - S3 E4)

What’s up everyone, Neil again with another installment of The Energy Academy.

So, now we know how the generation mix, or generation stack, is determined, it’s time to look at how those generators make money.

And over 90% of electricity trades occur in advance of delivery - between generators and suppliers on what are called forward or futures markets.

Forward and futures trades allow market participants to contract a price today for electricity to be delivered at some point in the future.

They come in all different shapes and sizes. But what’s the point in contracting to sell electricity now that won’t actually move through wires and cables for another two years?

Well, they essentially reduce risk.

Generators have the security of knowing that someone will buy their electricity, and suppliers get to know that they will have electricity to meet their customers’ demands.

And, by locking in the price well ahead of delivery, generators and suppliers reduce their exposure to continually changing and often volatile spot market prices.

So how do they actually work?

Find out more: https://platform.modo.energy/phase