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Until the end of the nineties, the trading of electricity was a bilateral business between electricity producers and local suppliers, typically the municipal utilities. Major energy suppliers such as EnBW and RWE ensured supply based on long-term supply contracts at fixed prices. Since the liberalization of the electricity market in 1998 and the deregulation of the gas market in 2003, energy has been traded on the open market.
This has been happening since 2002 at the Leipzig stock exchange, the European Energy Exchange (EEX). Alongside electricity and gas, as well as some other products like agricultural goods, trading of so-called CO2 emission rights also takes place here. The three market participants – suppliers, network operators, and producers – negotiate the electricity price on a daily basis. Of particular importance for those focusing on green energy is the fact that at the Leipzig stock exchange, the entire electricity supported by the Renewable Energy Sources Act (EEG) is also traded. A renewable energy trader purchases the energy mix here, which is subsequently delivered to customers. However, they are no longer allowed to label it as green energy but must declare it as EEG surcharge.
Yet only a quarter of the German energy consumption is traded on the power exchange. 75 percent of the electricity is traded through OTC trading; the abbreviation stands for Over the Counter and denotes long-term supply contracts between electricity suppliers and major customers. Short-term purchases of electricity are generally much more expensive than long-term contracts. Therefore, it is crucial for electricity traders, especially providers of green energy, to plan their growth in the long term.
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