If you sell power for a living or worry about when the wind stops blowing, this one's for you. European Energy Exchange AG, billed as the world's largest power marketplace, is weighing exchange-traded contracts tied to onshore wind, solar and temperature. The products under review would cover Germany, the UK, France, the Netherlands and Spain, aiming to cushion the hit from weather-driven swings in renewable output.
Under the plan, payouts would be calculated using third party data from Enwex GmbH, a German index specialist. The exact contract terms and any go-live dates are still open. EEX has asked trading firms for input on the design, and it has been hosting briefings and webinars on the topic. The exchange says it is "actively discussing" the contracts with members, while emphasizing that nothing is locked in.
Weather hedges on exchanges aren't new, but many have failed to attract steady trading because volumes stayed thin. Custom protection for temperature, wind speeds and solar output mostly happens away from exchanges in bilateral markets, where brokers say terms can be tailored more easily. Still, appetite for listed products has climbed in recent years as both weather patterns and short term power prices have become choppier.
The Chicago Mercantile Exchange, India's NCDEX and several prediction platforms have all broadened their climate and weather lineups. The CME's newly launched wind contracts, first reported by Bloomberg in June, are slated to start trading on Oct. 5.
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If EEX moves ahead, listed weather futures would give utilities, generators and traders another way to smooth out weather risk that can whipsaw power prices. With wind and solar now a much larger slice of the grid in Europe and worldwide, tools that translate weather into price protection are getting more relevant. Details and timing are still TBD, so the watch items now are contract specs and whether enough players show up to make liquidity stick.
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