CME Group, a global derivatives marketplace, announced its plans to launch financially-settled wind power futures and options for the fourth quarter.
Pending regulatory approval, the group said it would provide new tools to help market participants manage their risks when it comes to investing in wind power generation. Based on indices provided by Vaisala Xweather, the futures will track and settle against independent datasets about projected wind power output at designated locations. The new contacts add to the group’s product offerings to help customers navigate the energy transition, the company said.
The five contracts cover four key global power regions with a significant amount of installed capacity or a notable percentage of their electricity coming from wind generation. The contracts are Wind Power Germany ERA5 100m 2019 Index; Wind Power Germany ERA5 100m 2022 B Index; Wind Power UK ERA5 100m 2022 Index; Wind Power Australia VIC 2024-06 Index, and Wind Power U.S. Texas ERCOT ERA5 100m 2022 Index.
“As wind power accounts for a growing share of electricity generation, hedging renewable energy markets has never been more important,” Peter Keavey, managing director and global head of Energy Products at CME Group, said. “Our new Wind futures and options contracts will provide market participants with a standardized, exchange-cleared solution to manage their exposure to fluctuating wind production impacting the power stack – all on the same platform as Natural Gas, Power, and Weather.”
The company said that unlike traditional commodities, electricity must be generated the moment it is consumed. In order to maintain balance between supply and demand, the energy grid relies on a diversified portfolio of sources, officials said. Wind is a key variable, dictating the marginal cost of energy and signals precisely when gas plants will turn on and when power prices are likely to move. Wind power generation grew by approximately 8 percent last year, the International Energy Agency said.