Energy Focus FY 2010/11
Tue 19 Jul 2011
THE YEAR IN REVIEW: Liquidity Statistics, Price Action in 2011, Futures Market Drivers, Options Market Review.
Highlights
- Annual liquidity in the d-cyphaTrade ASX Electricity Futures and Options market grew to 549 million MWh (285% of underlying physical electricity demand);
- 2012 futures prices rallied to their highs by June 30; and
- Options on electricity futures contracts reached record implied volatility levels and traded the equivalent of 82% of underlying physical electricity demand.
Futures hedges avoid Carbon Tax Uncertainty
Industrial electricity consumers and NEM Retailers were able to use electricity futures to lock in a price of electricity that avoids retrospective carbon-tax-add on costs. i.e. During January 2011, buying VIC futures at $35.50/MWh across 2012, locked in a hedge price of $35.50/MWh regardless of the introduction of a Carbon Tax. Similarly, buying call Options on Futures (when exercised) deliver into futures hedges at the “pre-agreed” option strike-price which is not revised upward retrospectively if/when a Carbon Tax is introduced. i.e. Futures and Options on Futures lock in price certainty for NEM Retailers and consumers amidst Carbon Price uncertainty.
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 | EF FY1011 | PDF, 589Kb |