DerivSource’s Bob Currie offers a brief explainer on the European power derivatives sector.
Trading volumes in power derivatives contracts have surged over the past three years, fuelled by the need to manage price volatility in the face of ongoing geopolitical uncertainties – particularly the challenges to energy supply triggered by Russia’s invasion of Ukraine in February 2022.
Against this background of high price volatility and supply constraints, energy derivatives have performed an important role in helping energy providers to hedge their risk and to protect continuity of supply to business and to households.
Leading energy exchanges offer a range of power futures and options contracts, which may include base and peak load futures, contracts based on locational price differentials and deferred settlement futures.
Base load futures contracts reference the amount of electricity required by an electrical grid to meet its continuous demand for power over a 24-hour period. Peak load futures refer to the provision of additional capacity above base load to meet spikes or demand peaks.
EEX
The European Energy Exchange (EEX), the Leipzig-based exchange venue majority-owned by Deutsche Börse, offers contracts on power, natural gas and emission allowances, as well as freight and agricultural products. This includes euro-denominated cash-settled futures contracts for 20 power markets across Europe, including German power futures as Europe’s most liquid power derivatives product. EEX indicates that it has a market share of more than 85% for German, French, Spanish and Italian power futures as per November 2024 data.
EEX also provides registry services, along with auctions for guarantees of origin, on behalf of the French State. Guarantees of origin are electronic documents that confirm that a commodity or energy source has been generated according to specified criteria. A renewable energy guarantee of origin, for example, certifies that energy has been generated from renewable sources.
ICE
ICE hosts futures and options contracts for crude oil, interest rates, equity derivatives, natural gas, power, coal, emissions and soft commodities. Globally, the exchange’s natural gas complex spans trading hubs across the US and Canada, Europe and Asia, supporting more than 600 financially and physically-delivered contracts.
Many trading firms find it commercially attractive to trade the Spark Spread complex – a measure of the difference between the spot price of electricity and the cost of producing electricity using natural gas, taking into account the cost of offsetting CO2 emissions when generating the power through that mechanism.
Amsterdam-based ICE Endex has built market depth in power derivatives to complement the liquidity that it already offered in natural gas and carbon contracts – for example through TTF natural gas, Brent Crude futures and options, and in the EUA carbon allowance benchmark contract. In doing so, it is enabling customers to trade the Spark Spread complex on a single platform, offering cross-margining benefits across the three types of contracts as well as strong liquidity in each of these instruments.
The exchange indicates that it is now the largest venue for trading German power options, with almost 100% market share. In German power futures, it has moved from having near zero market share two years ago to now having close to 20% of the market at the time of writing.
Euronext and Nasdaq Nordic
Euronext has extended its footprint into the power derivatives marketplace through signing a binding agreement to purchase Nasdaq Nordic’s power derivatives business. The two parties plan to migrate Nasdaq Nordic power futures business to Euronext during H1 2026, subject to regulatory approval, with trading operating from Euronext Amsterdam and being cleared through Euronext Clearing.
Alongside baseload and peakload futures, Nasdaq Nordics offers deferred settlement (DS) futures for power contracts in Germany, France, the Netherlands, Italy, Spain, Belgium, and the UK, helping energy producers and energy consumers to mitigate price risks linked to physical contracts. DS futures and Monthly DS Futures contracts are financially-settled in euro (or GBP for UK power futures), and are designed to provide the same cash flow as physical power contracts.
In the Nordics, electricity markets are organised regionally into price areas and the area price may differ between locations. Energy Price Area Differentials (EPADs) are futures referencing the difference between an area price and a reference price or index (for example the Nordic system price), enabling participants to hedge this locational price risk. A system of locational pricing exists in a number of other domestic electricity markets around the world, including the US and New Zealand.
CME
CME Group offers energy futures and options against a range of European benchmark energy contracts, including Dutch TTF natural gas futures and Platts LNG North West Europe futures. This complements a comprehensive energy derivatives product suite that it offers in North American markets and internationally, including benchmark WTI Crude, Henry Hub Natural Gas, Brent Crude, RBOB Gasoline contracts.
Transitions to Renewable Energy
Exchanges continue to innovate to extend flexibility in hedging and trading opportunities available through power and energy derivative products, including steps to facilitate the transition to renewable energy.
During 2024, EEX introduced Nordic Zonal Futures, offering financially-settled futures for all 12 Danish, Finnish, Norwegian, and Swedish bidding zones. EEX indicates that these zonal futures contracts address the need for greater transparency in the Nordic power markets and deliver more precise hedging tools that are tailored to the unique characteristics of each bidding zone.
In February 2025, EEX introduced “Mon-Sun Peak Power Futures” for the Spanish market, which address the shift in power spot prices influenced by photovoltaic generation during daytime. These contracts cover peak hours from 08:00 to 20:00 CET, Monday to Sunday, matching the hedging needs over a full week in line with solar power production.
EEX has also sought to widen access to Power Purchase Agreement (PPA) hedging through its long-term futures contracts. The standard configuration for EEX power futures is for base-year contracts up to 6 calendar years in the future. Alongside this, EEX offers tradable yearly base maturities for German, Italian, Spanish, Dutch and French Power Futures from six to 10 calendar years. This facilitates PPA hedging on the exchange, with central clearing available via European Commodity Clearing (ECC). This facility enables counterparties to mitigate the pricing risk associated with the long-term nature of PPA contracts, EEX notes, while providing additional tools to support the transition to renewable energy sources in Europe.
