SINGAPORE: The growth of the Japanese business of the European Energy Exchange (EEX) is exceeding expectations, its CEO Peter Reitz told Reuters in an interview late Monday (Aug 14).
EEX, the world's largest electricity exchange, saw a sharp drop in traded volumes last year, as Russia's invasion of Ukraine in February 2022 pushed power tariffs across Europe to record highs, and resulted in a slump in power purchasing interest.
Prices have since cooled, with spot power trading volumes on EEX's European exchanges rebounding to grow at over 30 per cent during the first half of the year. Reitz said he expected EEX's relatively new Japanese business as a key growth prospect in the coming years.
Japan's electricity consumption is twice as high as Germany, the biggest power market in Europe, he said, but electricity currently traded on the Asian country's exchanges is a fraction of the volumes in Germany.
German power consumption was around 500 terawatt hours (tWh) in 2022, while traded futures were north of 2000 tWh. However, Japanese traded volumes were a mere 10 tWh in the first seven months of the year, he said.
"So it's still very small scale, compared to where it can be, when it reaches the same liquidity as some of the more mature markets," Reitz told Reuters.
"It has a lot of growth potential."
Reitz said the growth of the Japanese market was due to a need to hedge against prices, especially after volatility in prices observed last year.
"Why it has been such a great success was that we were able to bring in the international community and link them with a local Japanese traders. So whenever that opportunity arises, we will look at those markets," he said.
Reitz said expanding its power market to Australia "could be of interest".
"We are watching that space, but it's not imminent."