Energy Trading: Buying and Selling Watts

Ricochet J · 9 Jan 2011 at 13:18

I understand large companies such as EDF, E.On, RWE nPower etc have in house traders and energy analysts. They buy and sell kilo and megawatts.

Out of pure speculation (I do not want to get into this) are these sort of trades open for general trading? Kind of the same way commodities, currency etc are traded?

cheechm · 9 Jan 2011 at 13:24

Well yes: Essentially you buy power from the power companies. If you have solar panels for instance, you can sell unused power back to the national grid. That is your trading for you.

PieMaster · 9 Jan 2011 at 13:24

In Europe, they're mostly traded bilaterally via an IDB (with a small minority executed on an exchange). So the biggest problem you'd have would be getting credit lines with the big players as they wouldn't trust you to be able to actually deliver the contract.

Larger companies or others which are havily exposed to market fluctuations would usually go via a bank to hedge the risk on thier behalf rather than directly participating.

Ricochet J · 9 Jan 2011 at 13:26

PieMaster are you an energy analyst or a trader?

PieMaster · 9 Jan 2011 at 13:35

Ricochet J said:
PieMaster are you an energy analyst or a trader?

I work for the company who makes the software which virtually all power, gas, coal and carbon (amongst a few other markets) is traded through. If you've got any specific questions I'm onvolved in both the commercial and technical sides, so fire away

beamer · 9 Jan 2011 at 14:29

Depends on your reasons for wanting to trade it.

I have similar views to those expressed by the author of this - http://seekingalpha.com/article/162402-electricity-is-not-an-energy-source

I'm invested in a Nuclear ETF (IE00B3C94706) and a much more general Energy ETF (GB00B15KYB02), because my position is currently that energy demand will increase in the long term and nuclear materials as a fuel source will becoming increasingly more popular relative to the other fuel sources. I've put this investment play at 7/10 on my personal risk scale.

There are probably short versions of these too, should you want exposure in that direction too.

Some have argued not having any investment in these sort of funds and investing in something else is sort of shorting too.

I find seekingalpha.com very useful for free investment ideas and analysis. There's quite a vibrant and informed community of people on there.

I would love to hear more from others on this subject too. Personally, I never tire of hearing people's viewpoints on investing and specific investments.