When will the trade of electricity on Belpex start?

The start of the day-ahead trade of electricity on Belpex is planned on the 21st of November 2006 for delivery of electricity on the 22nd of November 2006, subject to the approval of the grid code by the Dutch regulator DTe. The trade of electricity on Belpex and the market coupling of Belpex, APX and Powernext is planned to take place simultaneously.

Why is the trilateral market coupling necessary?

Market coupling will optimise the use of the available capacity and therefore enhance congestion management on both Belgian-Dutch and Belgian-French borders; trading of the commodity (electricity) and acquisition of transmission capacity are coordinated and merged into one single operation, enabling the coordination of capacity allocation over the two borders and the full netting of counterflows. This contributes to realise the EU vision of an integrated internal energy market.

Another benefit is the generation of additional liquidity on the three concerned markets.

Can other countries join the market coupling?

Belpex and its partners have chosen a gradual approach, with the initial market coupling restricted to the three participating countries. There is however a consensus among the parties that the mechanism could be extended in a later stage.

Will Belpex launch futures?

A futures contract is a standardised contract to buy or to sell a certain volume of electricity at a pre-agreed future point in time. The exchange acts as counterparty to all trades. The trade in futures is in most cases linked to the trade of commodity on which is based. Futures give the market players the possibility to hedge their positions on the electricity markets.

In general, creating favourable market conditions for the launch of futures takes time. It took 3 to 5 years in the neighbouring countries after the launch of the day-ahead markets before the electricity futures market was launched. Belpex will most certainly consider the launch of futures when the day-ahead market is functioning well and the market conditions are favourable.

How is the price on the day-ahead market determined?

Each morning the market participants submit, via an electronic trading platform, their purchase or sales orders for each hour of the following day. At the market gate closure time, all purchase and sales orders are aggregated by hourly periods and ranked according to their price. For each hour, the intersection of the aggregated supply and the aggregated demand curve determines the market results, i.e. the market clearing price and the market clearing volume. After this fixing is performed, the market results are made available to the participants.

At the fixing, irrevocable contracts are created which oblige participants to deliver to or to withdraw from the Belgian electricity hub, during the predetermined hours of the following day, the volume of electricity in accordance with their contracts. The market price is identical for all cleared orders, but may of course change from one hour to the next.

Click here for more information about the day-ahead trade.

What is market coupling?

Coupling several markets implies handling their respective supply and purchase curves jointly by matching the highest purchase orders and lowest sales orders, regardless of where they have been introduced, but taking into account the available interconnection capacity.

The overall aim of market coupling is to maximise the total surplus of all participants: cheaper generation in one country can cover more valuable demand in another country. This coupling implies an energy flow across the borders and is therefore limited by the available cross border capacity. When no congestion occurs on borders between coupled markets, they form a zone of unique prices. When the demand is higher than the available interconnection capacity (congestion), there remains a price difference between the coupled zones.

Market coupling will optimize the use of the available transmission capacity and therefore enhance congestion management on both Belgian-Dutch and French-Belgian borders: trading of the commodity (electricity) and acquisition of transmission capacity are coordinated and merged into a single operation.

Click here for more information about the market coupling.