Comments from NAET Autumn Meeting

Comments about the Nordic Power market and liquidity from NAET’s autumn meeting in Oslo

 

“Slightly worn, but dignified, and not too old for sex”, Fredrik Bodecker’s opening remarks on the state of the Nordic power market

 

“We are all in the same boat, no liquidity will lead to no traders and ultimately no exchange“Hermund Ulstein NAET chairman

 

“I am not sure that trading front month, quarter and year will be the answer to everything – we need to open our minds and adapt”, Ola Kvennås Statkraft

 

“Some seem to blame greed and the financial regulations intended to safeguard us from it, for the current lack of liquidity, and there is no doubt that these have caused problems in the past. Others point to small price areas with frequently changing borders, which may make the system price an ineffective hedge. Still more note low and declining power prices, which limit the downside and hence the incentive for utilities and industrial players to hedge. All of them may have a point. But could it in fact be a lack of greed, and a failure to innovate that is at least partly to blame?”, Marius Holm Rennesund Thema Cosulting

 

“We cannot base our future on the hope that «big funds» will come in and save our market as bunch of white knights. The hedge funds will be here with the right amount of money if the market is there when they see an opportunity. If we want more liquidity in the future – everybody must contribute today”, Morten Erik Pettersen Uniper

 

“The open interest has been remarkably stable over time”, Marius Holm Rennesund Thema Cosulting

 

“Regulators need to act in a coherent and consistent way. If the biggest risk is political influence – that’s a problem for the market!” Georg Aasen Nasdaq

“The best way to sell the Nordic market internationally is to focus on the differences in the price drivers. Being different by design and regulatory framework adds complexity and is not a value added – the result is a costly unattractive barrier for new entrants”, Heine Rönningen EEX

 

“In my time in the industry we have gone from rain drops to Xi Jinping”, Andreas Myhre LOS Energy Retail

 

“We must not be afraid of talking about the big elephant in the room: There are too many companies that do not actively participate in the market anymore. When several of the large producers in Norway decide not to trade, and not use the forward market for active production optimisation, it should be questioned if they do what is best for their company. Too many CEOs has stated that there is not possible to make money in the trading market. The liquidity has been there. The volatility has been there. However, we are afraid of accepting that not everybody sitting in a trading position are good enough. The activity in the market has been very dependent of individuals and we should not underestimate that. Instead of recruiting new and the right talent when things are not going in the right direction, managers have let traders or portfolio managers sit in the same role for 10-15 years and in the end closing down the activity “because there are no opportunities”. In other successful commodities markets, the turnaround has been much larger and only the successful ones continue. The result has been a steady flow of talents and new ideas and technologies into the organisations. If we do not want to think new in this area, recruit new talent, I am afraid that the future of the Nordic power market is not very bright”, Morten Erik Pettersen Uniper

 

“Cash collateralized futures are part of the solution, not the problem” Andre Rörheim DnB

 

“There is a full lack of vision from central policy makers and market actors in Nordics. We complain about poor markets and go to Germany to study Energiwende, but do not discuss with each other how to develop our common market", Simon-Erik Ollus, Fortum Trading and Asset Optimisation

 

“It is for you to tell what underlying you want to trade on, we can always evaluate to adjust the configuration of reference prices, and establish alternative reference prices, to be calculated linked to the physical underlying Spot Market, but in the end any reference price has to be trusted and useful for the market. As long as the market thinks the Nordic System Price as currently defined is useful and efficient as underlying for long term trading and hedging instruments we are committed to continue to calculate it, and we find that it is based on a since long time transparent basic set of principles and it is set based on all the Orders provided for the Day Ahead Price Coupling, thus while it is an idealised supply-demand equilibrium disregarding internal Nordic grid limitations it is still clearly linked to the physical power market”, Rickard Nilsson Nord Pool 

 

“I do not care about futures or forwards, it drowns in other costs”, Andreas Myhre LOS Energy Retail

 

“Hope is not a strategy”, Heine Rönningen EEX