February 6, 2018 / 4:10 PM / in 8 months

INTERVIEW-German power market aims for trading volume surge in 2018

* Plans to grow power volumes by a double-digit rate

* Confidence returns after French nuclear problems

* Adjusting to Austria-German price zone split

* Business in Spain, Italy improves

By Vera Eckert

ESSEN, Germany, Feb 6 (Reuters) - The European Energy Exchange (EEX) expects to return to growth this year after overcoming the negative effects of tighter regulations and uncertainty about French nuclear supply.

Chief Executive Peter Reitz told Reuters that the exchange, part of Deutsche Boerse, is aiming to improve power trading volumes this year so they can achieve growth similar to its other contracts such as gas, carbon, and freight.

“We intend to increase power trading volumes again in 2018 in the double-digit range,” he said in an interview at the E-World trade fair in Europe’s biggest energy market.

Reitz said the factors that had dampened trading in power contracts in 2017 had now largely been digested by the market.

Trading volumes in the EEX’s flagship power products last year fell 17 percent year-on-year to 3,761 terawatt hours (TWh).

The prospect of tighter regulation of financial markets in the European Union under new rules known as MiFID II, hampered customers’ trading activities as they were preoccupied with preparations for this new regime, Reitz said.

MiFID II, which came into effect in January, aims to increase transparency in EU financial markets.

The problems appeared to have been overcome in early 2018 in a “largely noiseless transition,” he said.

Another distraction for the power markets was European regulators’ decision to split up the German and Austrian joint power trading zones from October 2018. This has meant that the joint EEX power contracts for the two countries are being phased out before the new, separate products have been fully established.

“This will continue to occupy us this year,” Reitz said.

The decision to split up the unified price zone aimed to resolve disputes between transporters, producers and consumers and with German neighbours to the East, who had to deal with unwanted surplus renewable energy.

Another negative for the power market was uncertainty over French nuclear supply. Some EEX participants left the French and adjacent power markets in response to a spate of extended reactor maintenance periods, which since late 2016 made longer-term planning for trading French power difficult.

But Reitz said there was now more confidence in the French authorities’ readiness to handle the long-term reduction of its reliance on nuclear power and communication had improved.

In addition, he said EEX was grabbing volumes from two indigenous power bourses in Spain and over-the-counter (OTC) traded power in Italy, bringing both to its multi-country trading and clearing platforms.

In Spain, Reitz said EEX had benefited from “scaling effects” vis-a-vis the Spanish operators because joint clearing saved trading members’ capital.

“We are a one-stop shop,” he said.

In Italy, he said he believed the EEX was attractive in a market where there was less transparency about participants.

EEX bought Czech rival PXE in 2016, which opens opportunities in eastern Europe, and U.S. power and gas rival Nodal last year. (Editing by Jane Merriman)

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