Relation between short-term and long-term contracts on the electricity markets in Europe

Abstract

Usually, long-term prices on the power exchanges are on average higher compared to the short-term ones. It is possible to exploit this pattern when developing power market related trading strategies. Furthermore, if there is a way to establish situations in which premiums of forward and futures prices over spots are higher than usual, some revenue increasing possibilities for the market players are available. These issues are analyzed in this article on the example of Czech & Slovak, German and Nordic electricity markets. Specific recommendations are also provided to the parties who trade on the electricity exchanges.