Optimal trading of wind power in the short term market

The energy reform, which is happening all over the world, is caused by the common concern of the future of the humankind in our shared planet. In order to keep the effects of the global warming inside of a certain limit, the use of fossil fuels must be reduced. The marginal costs of the renewable sources, RES are quite high, since they are new technology. In order to induce the implementation of RES to the power grid and lower the marginal costs, subsidies were developed in order to make the use of RES more profitable. From the RES perspective the current market is developed to favor conventional generation, which mainly uses fossil fuels. Intermittent generation, like wind power, is penalized in the electricity market since it is intermittent and thus diffi-cult to control. Therefore, the need of regulation and thus the regulation costs to the producer differ, depending on what kind of generation market participant owns. In this thesis it is studied if there is a way for market participant, who has wind power to use the special characteristics of electricity market Nord Pool and thus reach the gap between conventional generation and the intermittent generation only by placing bids to the market. Thus, an optimal bid is introduced, which purpose is to minimize the regulation costs and thus lower the marginal costs of wind power. In order to make real life simulations in Nord Pool, a wind power forecast model was created. The simulations were done in years 2009 and 2010 by using a real wind power data provided by Hyötytuuli, market data from Nord Pool and wind forecast data provided by Finnish Meteorological Institute. The optimal bid needs probability intervals and therefore the methodology to create probability distributions is introduced in this thesis. In the end of the thesis it is shown that the optimal bidding improves the position of wind power producer in the electricity market.

Impact of reliability of supply on long-term development approaches to electricity distribution networks

The Finnish electricity distribution sector, rural areas in particular, is facing major challenges because of the economic regulation, tightening supply security requirements and the ageing network asset. Therefore, the target in the distribution network planning and asset management is to develop and renovate the networks to meet these challenges in compliance with the regulations in an economically feasible way. Concerning supply security, the new Finnish Electricity Market Act limits the maximum duration of electricity supply interruptions to six hours in urban areas and 36 hours in rural areas. This has a significant impact on distribution network planning, especially in rural areas where the distribution networks typically require extensive modifications and renovations to meet the supply security requirements. This doctoral thesis introduces a methodology to analyse electricity distribution system development. The methodology is based on and combines elements of reliability analysis, asset management and economic regulation. The analysis results can be applied, for instance, to evaluate the development of distribution reliability and to consider actions to meet the tightening regulatory requirements. Thus, the methodology produces information for strategic decision-making so that DSOs can respond to challenges arising in the electricity distribution sector. The key contributions of the thesis are a network renovation concept for rural areas, an analysis to assess supply security, and an evaluation of the effects of economic regulation on the strategic network planning. In addition, the thesis demonstrates how the reliability aspect affects the placement of automation devices and how the reserve power can be arranged in a rural area network.

Cross-border transmission capacity development – Experiences from the Nordic electricity markets

The liberalisation of the wholesale electricity markets has been considered an efficient way to organise the markets. In Europe, the target is to liberalise and integrate the common European electricity markets. However, insufficient transmission capacity between the market areas hampers the integration, and therefore, new investments are required. Again, massive transmission capacity investments are not usually easy to carry through. This doctoral dissertation aims at elaborating on critical determinants required to deliver the necessary transmission capacity investments. The Nordic electricity market is used as an illustrative example. This study suggests that changes in the governance structure have affected the delivery of Nordic cross-border investments. In addition, the impacts of not fully delivered investments are studied in this doctoral dissertation. An insufficient transmission network can degrade the market uniformity and may also cause a need to split the market into smaller submarkets. This may have financial impacts on market actors when the targeted efficient sharing of resources is not met and even encourage gaming. The research methods applied in this doctoral dissertation are mainly empirical ranging from a Delphi study to case studies and numerical calculations.

Distributed energy resources in an electricity retailer’s short-term profit optimization

Liberalization of electricity markets has resulted in a competed Nordic electricity market, in which electricity retailers play a key role as electricity suppliers, market intermediaries, and service providers. Although these roles may remain unchanged in the near future, the retailers’ operation may change fundamentally as a result of the emerging smart grid environment. Especially the increasing amount of distributed energy resources (DER), and improving opportunities for their control, are reshaping the operating environment of the retailers. This requires that the retailers’ operation models are developed to match the operating environment, in which the active use of DER plays a major role. Electricity retailers have a clientele, and they operate actively in the electricity markets, which makes them a natural market party to offer new services for end-users aiming at an efficient and market-based use of DER. From the retailer’s point of view, the active use of DER can provide means to adapt the operation to meet the challenges posed by the smart grid environment, and to pursue the ultimate objective of the retailer, which is to maximize the profit of operation. This doctoral dissertation introduces a methodology for the comprehensive use of DER in an electricity retailer’s short-term profit optimization that covers operation in a variety of marketplaces including day-ahead, intra-day, and reserve markets. The analysis results provide data of the key profit-making opportunities and the risks associated with different types of DER use. Therefore, the methodology may serve as an efficient tool for an experienced operator in the planning of the optimal market-based DER use. The key contributions of this doctoral dissertation lie in the analysis and development of the model that allows the retailer to benefit from profit-making opportunities brought by the use of DER in different marketplaces, but also to manage the major risks involved in the active use of DER. In addition, the dissertation introduces an analysis of the economic potential of DER control actions in different marketplaces including the day-ahead Elspot market, balancing power market, and the hourly market of Frequency Containment Reserve for Disturbances (FCR-D).

‘Nudging’ energy users: regulatory measures to address the risk of aggregate peak demand in European electricity markets

For decades regulators in the energy sector have focused on facilitating the maximisation of energy supply in order to meet demand through liberalisation and removal of market barriers. The debate on climate change has emphasised a new type of risk in the balance between energy demand and supply: excessively high energy demand brings about significantly negative environmental and economic impacts. This is because if a vast number of users is consuming electricity at the same time, energy suppliers have to activate dirty old power plants with higher greenhouse gas emissions and higher system costs. The creation of a Europe-wide electricity market requires a systematic investigation into the risk of aggregate peak demand. This paper draws on the e-Living Time-Use Survey database to assess the risk of aggregate peak residential electricity demand for European energy markets. Findings highlight in which countries and for what activities the risk of aggregate peak demand is greater. The discussion highlights which approaches energy regulators have started considering to convince users about the risks of consuming too much energy during peak times. These include ‘nudging’ approaches such as the roll-out of smart meters, incentives for shifting the timing of energy consumption, differentiated time-of-use tariffs, regulatory financial incentives and consumption data sharing at the community level.

CASCADE: An Agent Based Framework For Modeling The Dynamics Of Smart Electricity Systems

The Complex Adaptive Systems, Cognitive Agents and Distributed Energy (CASCADE) project is developing a framework based on Agent Based Modelling (ABM). The CASCADE Framework can be used both to gain policy and industry relevant insights into the smart grid concept itself and as a platform to design and test distributed ICT solutions for smart grid based business entities. ABM is used to capture the behaviors of diff erent social, economic and technical actors, which may be defi ned at various levels of abstraction. It is applied to understanding their interactions and can be adapted to include learning processes and emergent patterns. CASCADE models ‘prosumer’ agents (i.e., producers and/or consumers of energy) and ‘aggregator’ agents (e.g., traders of energy in both wholesale and retail markets) at various scales, from large generators and Energy Service Companies down to individual people and devices. The CASCADE Framework is formed of three main subdivisions that link models of electricity supply and demand, the electricity market and power fl ow. It can also model the variability of renewable energy generation caused by the weather, which is an important issue for grid balancing and the profi tability of energy suppliers. The development of CASCADE has already yielded some interesting early fi ndings, demonstrating that it is possible for a mediating agent (aggregator) to achieve stable demandfl attening across groups of domestic households fi tted with smart energy control and communication devices, where direct wholesale price signals had previously been found to produce characteristic complex system instability. In another example, it has demonstrated how large changes in supply mix can be caused even by small changes in demand profi le. Ongoing and planned refi nements to the Framework will support investigation of demand response at various scales, the integration of the power sector with transport and heat sectors, novel technology adoption and diffusion work, evolution of new smart grid business models, and complex power grid engineering and market interactions.

Market coupling in the power markets

The thesis analyses the European Unions’ effort to create an integrated pan-European electricity market based on “market coupling” as the proposed allocation mechanism for interconnector transfer capacity. Thus, the thesis’ main focus is if market coupling leads to a price convergence in interlinked markets and how it affects the behavior of electricity price data. The applied research methods are a qualitative, structured literature review and a quantitative analysis of electricity price data. The quantitative analysis relies on descriptive statistics of absolute price differentials and on a Cointegration analysis according to Engle & Granger (1987)’s two step approach. Main findings are that implicit auction mechanisms such as market coupling are more efficient than explicit auctions. Especially the method of price coupling leads to a price convergence in involved markets, to social welfare gains and reduces market power of producers, as shown on the example of the TLC market coupling. The market coupling initiative between Germany and Denmark, on the other hand, is evaluated as less successful and illustrates the complexity and difficulties of implementing market coupling initiatives. The cointegration analysis shows that the time series were already before the coupling date cointegrated, but the statistical significance increased. The thesis suggests that market coupling leads to a price convergence of involved markets and thus functions as method to create a single, integrated European electricity market.

A Bilevel Approach to Transmission Expansion Planning Within a Market Environment

We present a bilevel model for transmission expansion planning within a market environment, where producers and consumers trade freely electric energy through a pool. The target of the transmission planner, modeled through the upper-level problem, is to minimize network investment cost while facilitating energy trading. This upper-level problem is constrained by a collection of lower-level market clearing problems representing pool trading, and whose individual objective functions correspond to social welfare. Using the duality theory the proposed bilevel model is recast as a mixed-integer linear programming problem, which is solvable using branch-and-cut solvers. Detailed results from an illustrative example and a case study are presented and discussed. Finally, some relevant conclusions are drawn.

Market-driven security-constrained transmission network expansion planning

This paper presents a Bi-level Programming (BP) approach to solve the Transmission Network Expansion Planning (TNEP) problem. The proposed model is envisaged under a market environment and considers security constraints. The upper-level of the BP problem corresponds to the transmission planner which procures the minimization of the total investment and load shedding cost. This upper-level problem is constrained by a single lower-level optimization problem which models a market clearing mechanism that includes security constraints. Results on the Garver's 6-bus and IEEE 24-bus RTS test systems are presented and discussed. Finally, some conclusions are drawn. © 2011 IEEE.

Committed to reform? Pragmatic antitrust enforcement in electricity markets

This thesis is a collection of essays about the instrumental use of commitment decisions to facilitate the completion of the European internal electricity market. European policy can shape markets in many ways, two most evident being regulation and competition enforcement. The interplay between these two instruments attracts a lot of scholarly attention. One of the major concerns in the competition vs. regulation debate is the instrumental use of competition rules. It has been observed that competition enforcement is triggered not only as a response to an anticompetitive harm occurring in the market, but that it sometimes becomes a powerful tool in the European Commission’s hands to pursue regulatory goals. This thesis looks for examples of such instrumentalisation in the context of electricity markets and finds that the Commission is very pragmatic in using all the possible instruments it has at hand to push forward its project of creating the internal electricity market. This includes regulation, competition enforcement and all sorts of political pressure. To the extent that commitment decisions accelerate sector-specific regulation and overcome political deadlocks, they contribute to the Commission’s energy policy goals. However, instrumentalisation of competition rules comes at a certain cost to competition policy, energy policy and, most importantly, to electricity markets themselves. Markets might be negatively affected either indirectly, by application of sector-specific regulation or competition policy building on previous commitment decisions, or directly, through the implementation of inadequate commitments in individual cases. Concluding, commitment decisions generally contributed to achieving the policy objectives of the internal electricity market, but their use for that purpose does not come without cost. Given that this cost is ultimately borne by the internal electricity market, the Commission should take a more balanced approach to the instrumental use of commitment decisions so that it does not do more harm than good.

Designing Electricity Auctions in the Presence of Transmission Constraints

This paper analyzes the effect that different designs in the access to fnancial transmission rights has on spot electricity auctions. In particular, I characterize the equilibrium in the spot electricity market when financial transmission rights are assigned to the grid operator and when financial transmission rights are assigned to the firm that submits the lowest bid in the spot electricity auction. When financial transmission rights are assigned to the grid operator, my model, in contrast with the models available in the literature, works out the equilibrium for any transmission capacity. Moreover, I have found that an increase in transmission capacity not only increases competition between markets but also within a single market. When financial transmission rights are assigned to the firm that submits the lowest bid in the spot electricity auction, firms compete not only for electricity demand, but also for transmission rights and the arbitrage profits derived from its hold. I have found that introduce competition for transmission rights reduces competition in spot electricity auctions.

Efficiency in Deregulated Electricity Markets: Offer Cost Minimization vs. Payment Cost Minimization Auction

This study of the wholesale electricity market compares the efficiency performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed mechanism. The analysis highlights the importance of considering strategic behavior when comparing different institutional systems. We find that in concentrated markets, neither auction mechanism can guarantee an efficient allocation. The advantage of the current mechanism increases with increased price competition if market demand is perfectly inelastic. However, if market demand has some responsiveness to price, the superiority of the current auction with respect to efficiency is not that obvious. We present a case where the proposed auction outperforms the current mechanism on efficiency even if all offers reflect true production costs. We also find that a market designer might face a choice problem with a tradeoff between lower electricity cost and production efficiency. Some implications for social welfare are discussed as well.

Can a Newly Proposed Mechanism for Allocating Contracts in U.S. Electricity Wholesale Markets Lead to Lower Prices? A Game Theoretic Analysis

This study of the wholesale electricity market compares the cost-minimizing performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed replacement. The current mechanism chooses an allocation of contracts that minimizes a fictional cost calculated using pay-as-offer pricing. Then suppliers are paid the market clearing price. The proposed mechanism uses the market clearing price in the allocation phase as well as in the payment phase. In concentrated markets, the proposed mechanism outperforms the current mechanism even when strategic behavior by suppliers is taken into account. The advantage of the proposed mechanism increases with increased price competition.

Electricity price forecasting accounting for renewable energies: optimal combined forecasts

Electricity price forecasting is an interesting problem for all the agents involved in electricity market operation. For instance, every profit maximisation strategy is based on the computation of accurate one-day-ahead forecasts, which is why electricity price forecasting has been a growing field of research in recent years. In addition, the increasing concern about environmental issues has led to a high penetration of renewable energies, particularly wind. In some European countries such as Spain, Germany and Denmark, renewable energy is having a deep impact on the local power markets. In this paper, we propose an optimal model from the perspective of forecasting accuracy, and it consists of a combination of several univariate and multivariate time series methods that account for the amount of energy produced with clean energies, particularly wind and hydro, which are the most relevant renewable energy sources in the Iberian Market. This market is used to illustrate the proposed methodology, as it is one of those markets in which wind power production is more relevant in terms of its percentage of the total demand, but of course our method can be applied to any other liberalised power market. As far as our contribution is concerned, first, the methodology proposed by García-Martos et al(2007 and 2012) is generalised twofold: we allow the incorporation of wind power production and hydro reservoirs, and we do not impose the restriction of using the same model for 24h. A computational experiment and a Design of Experiments (DOE) are performed for this purpose. Then, for those hours in which there are two or more models without statistically significant differences in terms of their forecasting accuracy, a combination of forecasts is proposed by weighting the best models(according to the DOE) and minimising the Mean Absolute Percentage Error (MAPE). The MAPE is the most popular accuracy metric for comparing electricity price forecasting models. We construct the combi nation of forecasts by solving several nonlinear optimisation problems that allow computation of the optimal weights for building the combination of forecasts. The results are obtained by a large computational experiment that entails calculating out-of-sample forecasts for every hour in every day in the period from January 2007 to Decem ber 2009. In addition, to reinforce the value of our methodology, we compare our results with those that appear in recent published works in the field. This comparison shows the superiority of our methodology in terms of forecasting accuracy.

Propuestas regulatorias para el diseño de un mercado ibérico a plazo eficiente de la energía = Regulatory proposals for the development of an efficient iberian energy forward market

El mercado ibérico de futuros de energía eléctrica gestionado por OMIP (“Operador do Mercado Ibérico de Energia, Pólo Português”, con sede en Lisboa), también conocido como el mercado ibérico de derivados de energía, comenzó a funcionar el 3 de julio de 2006. Se analiza la eficiencia de este mercado organizado, por lo que se estudia la precisión con la que sus precios de futuros predicen el precio de contado. En dicho mercado coexisten dos modos de negociación: el mercado continuo (modo por defecto) y la contratación mediante subasta. En la negociación en continuo, las órdenes anónimas de compra y de venta interactúan de manera inmediata e individual con órdenes contrarias, dando lugar a operaciones con un número indeterminado de precios para cada contrato. En la negociación a través de subasta, un precio único de equilibrio maximiza el volumen negociado, liquidándose todas las operaciones a ese precio. Adicionalmente, los miembros negociadores de OMIP pueden liquidar operaciones “Over-The-Counter” (OTC) a través de la cámara de compensación de OMIP (OMIClear). Las cinco mayores empresas españolas de distribución de energía eléctrica tenían la obligación de comprar electricidad hasta julio de 2009 en subastas en OMIP, para cubrir parte de sus suministros regulados. De igual manera, el suministrador de último recurso portugués mantuvo tal obligación hasta julio de 2010. Los precios de equilibrio de esas subastas no han resultado óptimos a efectos retributivos de tales suministros regulados dado que dichos precios tienden a situarse ligeramente sesgados al alza. La prima de riesgo ex-post, definida como la diferencia entre los precios a plazo y de contado en el periodo de entrega, se emplea para medir su eficiencia de precio. El mercado de contado, gestionado por OMIE (“Operador de Mercado Ibérico de la Energía”, conocido tradicionalmente como “OMEL”), tiene su sede en Madrid. Durante los dos primeros años del mercado de futuros, la prima de riesgo media tiende a resultar positiva, al igual que en otros mercados europeos de energía eléctrica y gas natural. En ese periodo, la prima de riesgo ex-post tiende a ser negativa en los mercados de petróleo y carbón. Los mercados de energía tienden a mostrar niveles limitados de eficiencia de mercado. La eficiencia de precio del mercado de futuros aumenta con el desarrollo de otros mecanismos coexistentes dentro del mercado ibérico de electricidad (conocido como “MIBEL”) –es decir, el mercado dominante OTC, las subastas de centrales virtuales de generación conocidas en España como Emisiones Primarias de Energía, y las subastas para cubrir parte de los suministros de último recurso conocidas en España como subastas CESUR– y con una mayor integración de los mercados regionales europeos de energía eléctrica. Se construye un modelo de regresión para analizar la evolución de los volúmenes negociados en el mercado continuo durante sus cuatro primeros años como una función de doce indicadores potenciales de liquidez. Los únicos indicadores significativos son los volúmenes negociados en las subastas obligatorias gestionadas por OMIP, los volúmenes negociados en el mercado OTC y los volúmenes OTC compensados por OMIClear. El número de creadores de mercado, la incorporación de agentes financieros y compañías de generación pertenecientes a grupos integrados con suministradores de último recurso, y los volúmenes OTC compensados por OMIClear muestran una fuerte correlación con los volúmenes negociados en el mercado continuo. La liquidez de OMIP está aún lejos de los niveles alcanzados por los mercados europeos más maduros (localizados en los países nórdicos (Nasdaq OMX Commodities) y Alemania (EEX)). El operador de mercado y su cámara de compensación podrían desarrollar acciones eficientes de marketing para atraer nuevos agentes activos en el mercado de contado (p.ej. industrias consumidoras intensivas de energía, suministradores, pequeños productores, compañías energéticas internacionales y empresas de energías renovables) y agentes financieros, captar volúmenes del opaco OTC, y mejorar el funcionamiento de los productos existentes aún no líquidos. Resultaría de gran utilidad para tales acciones un diálogo activo con todos los agentes (participantes en el mercado, operador de mercado de contado, y autoridades supervisoras). Durante sus primeros cinco años y medio, el mercado continuo presenta un crecimento de liquidez estable. Se mide el desempeño de sus funciones de cobertura mediante la ratio de posición neta obtenida al dividir la posición abierta final de un contrato de derivados mensual entre su volumen acumulado en la cámara de compensación. Los futuros carga base muestran la ratio más baja debido a su buena liquidez. Los futuros carga punta muestran una mayor ratio al producirse su menor liquidez a través de contadas subastas fijadas por regulación portuguesa. Las permutas carga base liquidadas en la cámara de compensación ubicada en Madrid –MEFF Power, activa desde el 21 de marzo de 2011– muestran inicialmente valores altos debido a bajos volúmenes registrados, dado que esta cámara se emplea principalmente para vencimientos pequeños (diario y semanal). Dicha ratio puede ser una poderosa herramienta de supervisión para los reguladores energéticos cuando accedan a todas las transacciones de derivados en virtud del Reglamento Europeo sobre Integridad y Transparencia de los Mercados de Energía (“REMIT”), en vigor desde el 28 de diciembre de 2011. La prima de riesgo ex-post tiende a ser positiva en todos los mecanismos (futuros en OMIP, mercado OTC y subastas CESUR) y disminuye debido a la curvas de aprendizaje y al efecto, desde el año 2011, del precio fijo para la retribución de la generación con carbón autóctono. Se realiza una comparativa con los costes a plazo de generación con gas natural (diferencial “clean spark spread”) obtenido como la diferencia entre el precio del futuro eléctrico y el coste a plazo de generación con ciclo combinado internalizando los costes de emisión de CO2. Los futuros eléctricos tienen una elevada correlación con los precios de gas europeos. Los diferenciales de contratos con vencimiento inmediato tienden a ser positivos. Los mayores diferenciales se dan para los contratos mensuales, seguidos de los trimestrales y anuales. Los generadores eléctricos con gas pueden maximizar beneficios con contratos de menor vencimiento. Los informes de monitorización por el operador de mercado que proporcionan transparencia post-operacional, el acceso a datos OTC por el regulador energético, y la valoración del riesgo regulatorio pueden contribuir a ganancias de eficiencia. Estas recomendaciones son también válidas para un potencial mercado ibérico de futuros de gas, una vez que el hub ibérico de gas –actualmente en fase de diseño, con reuniones mensuales de los agentes desde enero de 2013 en el grupo de trabajo liderado por el regulador energético español– esté operativo. El hub ibérico de gas proporcionará transparencia al atraer más agentes y mejorar la competencia, incrementando su eficiencia, dado que en el mercado OTC actual no se revela precio alguno de gas. ABSTRACT The Iberian Power Futures Market, managed by OMIP (“Operador do Mercado Ibérico de Energia, Pólo Português”, located in Lisbon), also known as the Iberian Energy Derivatives Market, started operations on 3 July 2006. The market efficiency, regarding how well the future price predicts the spot price, is analysed for this energy derivatives exchange. There are two trading modes coexisting within OMIP: the continuous market (default mode) and the call auction. In the continuous trading, anonymous buy and sell orders interact immediately and individually with opposite side orders, generating trades with an undetermined number of prices for each contract. In the call auction trading, a single price auction maximizes the traded volume, being all trades settled at the same price (equilibrium price). Additionally, OMIP trading members may settle Over-the-Counter (OTC) trades through OMIP clearing house (OMIClear). The five largest Spanish distribution companies have been obliged to purchase in auctions managed by OMIP until July 2009, in order to partly cover their portfolios of end users’ regulated supplies. Likewise, the Portuguese last resort supplier kept that obligation until July 2010. The auction equilibrium prices are not optimal for remuneration purposes of regulated supplies as such prices seem to be slightly upward biased. The ex-post forward risk premium, defined as the difference between the forward and spot prices in the delivery period, is used to measure its price efficiency. The spot market, managed by OMIE (Market Operator of the Iberian Energy Market, Spanish Pool, known traditionally as “OMEL”), is located in Madrid. During the first two years of the futures market, the average forward risk premium tends to be positive, as it occurs with other European power and natural gas markets. In that period, the ex-post forward risk premium tends to be negative in oil and coal markets. Energy markets tend to show limited levels of market efficiency. The price efficiency of the Iberian Power Futures Market improves with the market development of all the coexistent forward contracting mechanisms within the Iberian Electricity Market (known as “MIBEL”) – namely, the dominant OTC market, the Virtual Power Plant Auctions known in Spain as Energy Primary Emissions, and the auctions catering for part of the last resort supplies known in Spain as CESUR auctions – and with further integration of European Regional Electricity Markets. A regression model tracking the evolution of the traded volumes in the continuous market during its first four years is built as a function of twelve potential liquidity drivers. The only significant drivers are the traded volumes in OMIP compulsory auctions, the traded volumes in the OTC market, and the OTC cleared volumes by OMIClear. The amount of market makers, the enrolment of financial members and generation companies belonging to the integrated group of last resort suppliers, and the OTC cleared volume by OMIClear show strong correlation with the traded volumes in the continuous market. OMIP liquidity is still far from the levels reached by the most mature European markets (located in the Nordic countries (Nasdaq OMX Commodities) and Germany (EEX)). The market operator and its clearing house could develop efficient marketing actions to attract new entrants active in the spot market (e.g. energy intensive industries, suppliers, small producers, international energy companies and renewable generation companies) and financial agents as well as volumes from the opaque OTC market, and to improve the performance of existing illiquid products. An active dialogue with all the stakeholders (market participants, spot market operator, and supervisory authorities) will help to implement such actions. During its firs five and a half years, the continuous market shows steady liquidity growth. The hedging performance is measured through a net position ratio obtained from the final open interest of a month derivatives contract divided by its accumulated cleared volume. The base load futures in the Iberian energy derivatives exchange show the lowest ratios due to good liquidity. The peak futures show bigger ratios as their reduced liquidity is produced by auctions fixed by Portuguese regulation. The base load swaps settled in the clearing house located in Spain – MEFF Power, operating since 21 March 2011, with a new denomination (BME Clearing) since 9 September 2013 – show initially large values due to low registered volumes, as this clearing house is mainly used for short maturity (daily and weekly swaps). The net position ratio can be a powerful oversight tool for energy regulators when accessing to all the derivatives transactions as envisaged by European regulation on Energy Market Integrity and Transparency (“REMIT”), in force since 28 December 2011. The ex-post forward risk premium tends to be positive in all existing mechanisms (OMIP futures, OTC market and CESUR auctions) and diminishes due to the learning curve and the effect – since year 2011 – of the fixed price retributing the indigenous coal fired generation. Comparison with the forward generation costs from natural gas (“clean spark spread”) – obtained as the difference between the power futures price and the forward generation cost with a gas fired combined cycle plant taking into account the CO2 emission rates – is also performed. The power futures are strongly correlated with European gas prices. The clean spark spreads built with prompt contracts tend to be positive. The biggest clean spark spreads are for the month contract, followed by the quarter contract and then by the year contract. Therefore, gas fired generation companies can maximize profits trading with contracts of shorter maturity. Market monitoring reports by the market operator providing post-trade transparency, OTC data access by the energy regulator, and assessment of the regulatory risk can contribute to efficiency gains. The same recommendations are also valid for a potential Iberian gas futures market, once an Iberian gas hub – currently in a design phase, with monthly meetings amongst the stakeholders in a Working Group led by the Spanish energy regulatory authority since January 2013 – is operating. The Iberian gas hub would bring transparency attracting more shippers and improving competition and thus its efficiency, as no gas price is currently disclosed in the existing OTC market.