Demystifying the Power Market: Terms Every Professional Should Know
Vocabulary of the power market terms
The power market is filled with specialized terminology that can be overwhelming, even for those who have been in the industry for years. To help you stay ahead, we’ve compiled a list of essential terms that every professional should know. From trading practices to regulatory bodies, this vocabulary will serve as your go-to reference for understanding the language of energy.
ACER – Agency for the Cooperation of Energy Regulators (Euroopan energiamarkkinoiden sääntelyviranomaisten yhteistyövirasto)
ACER coordinates and oversees energy market regulation across the EU, ensuring efficient, transparent, and fair markets, and collaborates with national regulatory authorities.
Balance Settlement – (taseselvitys)
Balance settlement is the process of reconciling actual electricity consumption and production with planned or contracted amounts, ensuring financial accountability and grid stability.
Baseload contract – (peruskuormasopimus)
A Baseload contract is a type of agreement where the buyer commits to purchasing a constant amount of energy (baseload) over a specific period. This model is often used to meet the continuous demand of large industrial consumers.
BRP – Balance Responsible Party (tasevastaava)
A BRP is responsible for maintaining the balance between electricity they produce or consume and what they trade in the market, ensuring grid stability.
BSP – Balancing Service Provider (tasepalveluntarjoaja)
A BSP provides services to the TSO to maintain supply and demand balance in the electricity grid, offering additional power or reducing consumption as needed.
Capacity agreement (kapasiteettisopimus)
In a Capacity Agreement, the buyer pays for the availability of a specific amount of generation capacity, regardless of whether it is actually used. This model is often used in markets where ensuring adequate capacity is critical to avoiding blackouts.
CHP – Combined Heat and Power (yhdistetty sähkön ja lämmön tuotanto)
CHP is an efficient process that generates electricity and captures otherwise wasted heat for useful purposes, enhancing energy efficiency and reducing emissions.
DSO – Distribution System Operator (jakeluverkonhaltija)
A DSO operates, maintains, and develops the electricity distribution network, ensuring efficient and reliable delivery of electricity to end users.
EFET – European Federation of Energy Traders (Euroopan energiakauppiaiden liitto)
EFET represents energy traders in Europe, known for developing standardized contracts like the EFET General Agreement, which facilitates secure and transparent energy trading.
ENTSO-E – European Network of Transmission System Operators for Electricity (Euroopan sähköverkonhaltijoiden yhteistyöjärjestö)
ENTSO-E coordinates the operation of Europe’s electricity transmission system, ensuring reliable grid operation and market integration across Europe.
EnCoHub OTC Marketplace
An OTC marketplace dedicated to physical power for the wholesale markets. Helps participants to secure the prices via bilateral agreements. No collateral are required.
EPEX – European Power Exchange (Eurooppalainen sähköpörssi)
EPEX is a platform for trading electricity in several European countries, operating day-ahead and intraday markets to facilitate transparent and efficient electricity trading.
eSett – (eSett is the central invoicing and settlement service provider for electricity markets in the Nordic region)
eSett manages invoicing and settlement in the Nordic electricity markets, ensuring accurate financial transactions and market balance in Finland, Sweden, and Norway.
FERC – Federal Energy Regulatory Commission (Yhdysvaltain energiaviranomainen)
FERC is a U.S. agency that regulates the interstate transmission of electricity, natural gas, and oil, overseeing wholesale markets and ensuring fair rates for consumers. While specific to the U.S., FERC’s decisions can have global implications, particularly for multinational energy companies.
FTR – Financial Transmission Rights (rahoitukselliset siirto-oikeudet)
FTRs are financial instruments that hedge against transmission congestion costs, providing compensation when grid constraints lead to price differences.
GCT – Gate Closure Time (portin sulkemisaika)
GCT marks the deadline for electricity market trading, after which schedules are fixed and participants must ensure their generation or consumption matches their bids.
Guarantee of Origin – (varmennettu uusiutuvan energian alkuperätakuu)
A GO is a certificate verifying that electricity is from renewable sources. It can be traded separately from the physical electricity, promoting renewable energy production.
ISDA – International Swaps and Derivatives Association (Kansainvälinen johdannaissopimusten järjestö)
ISDA sets global standards for derivatives trading, including energy derivatives, providing a standardized legal framework through the ISDA Master Agreement.
LCOE – Levelized Cost of Electricity (sähkön tasoitettu kustannus)
LCOE represents the average total cost of building and operating a power plant over its lifetime, used to compare the economic viability of different energy sources.
MWh – Megawatt-hour (megawattitunti)
MWh is a unit of energy representing one million watts of power used over one hour, commonly used to measure electricity generation or consumption.
NEMO – Nominated Electricity Market Operator (nimetty sähkömarkkinaoperaattori)
A NEMO operates day-ahead and intraday electricity markets, facilitating trading and ensuring market transparency within the European electricity market.
Nordpool – Nordpool is one of the largest power markets in Europe, where electricity is bought and sold across several countries including the Nordic and Baltic regions. Nordpool porivides platforms for day-ahead and intraday trading.
NRA – National Regulatory Authority (kansallinen sääntelyviranomainen)
An NRA regulates the energy market within a specific country, ensuring compliance with national and European regulations, overseeing market participants, and protecting consumers.
Offset – (Päästöhyvitys)
An emissions reduction, commonly resulting from a project undertaken in the developing world, which has been sold to compensate for emissions elsewhere. Offsets are commonly used to net off corporate emissions so that an organization can claim to be carbon neutral.
OTC – Over-the-Counter (kaupankäynti suoraan ilman pörssiä)
OTC trading involves buying and selling electricity directly between two parties without an exchange, offering flexible contract terms but with higher counterparty risk.
Peakload contract
A Peak Load contract involves the purchase of electricity during peak demand periods. This type of contract is typically used to secure energy during times when demand is highest, and prices are more volatile.
PPA – Power Purchase Agreement (sähkönostosopimus)
A PPA is a long-term contract between an electricity producer and a buyer, often used for renewable energy projects, providing price stability and facilitating financing.
REMIT – Regulation on Wholesale Energy Market Integrity and Transparency (tukkumarkkinoiden eheys- ja läpinäkyvyysasetus)
REMIT is an EU regulation aimed at ensuring transparency and integrity in the wholesale energy markets, prohibiting market manipulation and insider trading.
RES – Renewable Energy Sources (uusiutuvat energialähteet)
RES refers to energy sources that are naturally replenished, such as wind, solar, and hydropower, playing a crucial role in reducing carbon emissions and promoting sustainability.
TSO – Transmission System Operator (kantaverkonhaltija or kantaverkko-operaattori)
A TSO is responsible for operating the national electricity transmission system, ensuring the reliable transport of electricity over long distances and maintaining grid stability.
Take-or-pay contract – (ota tai maksa)
Take-or-pay clause allows the buyer to secure an agreed-upon quantity of energy, with the flexibility to either utilize the full amount or compensate the producer if less is used. This model provides the producer with stable and predictable financial returns, ensuring consistent revenue while offering the buyer reliable access to energy.
VPPA – Virtual Power Purchase Agreement (virtuaalinen sähkönostosopimus)
A VPPA is a financial contract where the buyer and renewable energy producer agree on a price, but the electricity is sold into the market rather than directly to the buyer, providing financial benefits tied to market prices.
Anything else?
Please let us know what’s missing from the list!