Commodity market

The activity of the GPW Group on the commodity market is concentrated in the Towarowa Giełda Energii Group which is comprised of TGE, its subsidiary Izba Rozliczeniowa Giełd Towarowych, as well as the OTC platform InfoEngine. The activity of the Towarowa Giełda Energii Group includes:

  • operation of a commodity exchange which offers trade in:
    • electricity;
    • natural gas;
    • emission allowances;
    • property rights in certificates of origin of electricity, biogas and energy efficiency;
    • commodity derivatives settled in cash;
  • operation of the Register of Certificates of Origin and the Register of Guarantees of Origin;
  • operation of the trade reporting system TGE RRM;
  • clearing of transactions on the commodity exchange.

Trading

Trade on TGE commodity markets

commodity market

Electricity Market

Day-Ahead and Intra-Day Market

The Day-Ahead and Intra-Day Market is a market in electricity with physical delivery and offers short-term electricity buy and sell transactions (spot market). This TGE market lists hourly instruments for each hour of delivery day as well as block instruments. Trade on the Day-Ahead Market takes place two days before and one day before the day of delivery. Trade on the Intra-Day Market takes place one day before the day of delivery and on the day of delivery.

The volume of spot trade in electricity decreased by 8.6% year on year to 25.2 TWh in 2017. The decrease was caused among others by a reduction of the volume of mandatory sales imposed on producers.

Volume of trading in electricity on the Day-Ahead and Intra-Day Market [TWh]



Commodity Forward Instruments Market in Electricity

The Commodity Forward Instruments Market in electricity offers trading in standard forward instruments for delivery of the same quantity of electricity on every hour of delivery. Contracts are executed on a weekly, monthly, quarterly and annual basis.

The volume of trading in electricity on the Commodity Forward Instruments Market was 86.4 TWh in 2017, a decrease of 12.7% year on year. The decrease in the volume of trading was due among others to the reduced volume of mandatory sales of energy on the exchange under Article 49a(2) of the Energy Law. Another driver was uncertainty about the implementation of MiFID2 in national law in H1 2017, which caused a sharp decrease of trading volumes also in other EU Member States.

Volume of trading in electricity on the Commodity Forward Instruments Market [TWh]



Gas Market

Day-Ahead and Intra-Day Market in Gas

The gas exchange celebrated its fifth anniversary in 2017. The gas exchange in Poland opened on 20 December 2012. The Commodity Forward Instruments Market opened first, followed by the Day-Ahead Market in Gas.

The Day-Ahead Market in Gas lists the following types of contracts: BASE with delivery on 24 hours of the next day of the same quantity of gas in every hour of the day, and WEEKEND with delivery on two days (Saturday and Sunday) of the same quantity of gas in every hour of the day (between 47 and 49 hours). On 30 July 2014, TGE launched the Intra-Day Market in Gas. The Intra-Day Market in Gas lists hourly instruments with delivery on the day of trading.

The volume of trading on the gas spot markets was 24.0 TWh in 2017, representing a decrease of 2.5% year on year. The volume of trading on the Day-Ahead Market in Gas was 19.3 TWh (a decrease of 1.9% year on year) and the volume of trading on the Intra-Day Market in Gas was 4.7 TWh (a decrease of 4.7% year on year).

Volume of trading in natural gas on the Day-Ahead and Intra-Day Market [TWh]



Commodity Forward Instruments Market in Gas

The total volume of trading on the Commodity Forward Instruments Market in Gas was 114.7 TWh in 2017, an increase of 27.6% year on year.

The total volume of trading on the gas markets was 138.7 TWh in 2017 (an increase of 21.1% year on year). The share of the spot market in the total volume of trading on the gas markets was 17.3% in 2017 compared to 21.5% in 2016. This percentage underscores the importance of TGE as a trading platform for the balancing market. The spot market plays an important function for the operator Gaz-System whose instructions include the calculation formula of the average price for balancing.

In those five years, the gas exchange has become an important, integral element of the Polish gas market. It ensures safe and transparent trade. The aggregate volume of spot and forward transactions stood at 469.8 TWh in 2012-2017. The gas market has 111 participants.

Volume of trading in natural gas on the Commodity Forward Instruments Market [TWh]



Property Rights Market

TGE operates a Property Rights Market in certificates of origin of electricity produced:

  • from renewable energy sources (PMOZE and PMOZE_A, known as green certificates),
  • in high-efficiency cogeneration (PMGM, known as yellow certificates; PMEC, known as red certificates; and PMMET, known as purple certificates),

Furthermore, the Property Rights Market lists:

  • property rights in certificates of origin of biogas (PMBG, known as brown certificates),
  • property rights in certificates of origin of agricultural biogas (PMOZE-BIO, known as blue certificates),
  • property rights in energy efficiency certificates (PMEF, known as white certificates).

The Property Rights Market is a part of the support scheme for producers of energy from renewable energy sources. It allows producers of energy from renewable energy sources, cogeneration, biogas and holders of energy efficiency certificates to sell property rights, and energy operators required to pay substitution fees or to cancel certificates of origin to meet that obligation.

The volume of trading on the Property Rights Market is driven by the number of certificates issued in the Register of Certificates of Origin: increased production of energy generates the obligation to issue more certificates of origin, which in turn generates an increase of the volume of certificates of origin available on the market.

The total volume of trading in property rights for electricity on the spot market was 58.0 TWh in 2017 compared to 50.2 TWh in 2016, an increase of 15.6% year on year. At the same time, the volume of trading in property rights to certificates of energy efficiency increased sharply year on year from 314.8 ktoe in 2016 to 399.9 ktoe in 2017.

Volume of trading in property rights to certificates of origin [TWh]



The volume of trading in property rights in certificates of origin of electricity generated from renewable energy sources was 29.8 TWh in 2017, an increase of 24.2% year on year. Bigger supply of certificates in 2017 and growing demand generated additional turnover in 2017.

The volume of trading in certificates of origin of energy from cogeneration, i.e., red and yellow certificates, was 28.3 TWh in 2017 (an increase of 7.9% year on year).

Structure of the volume of trading in property rights in 2017 by type of certificate



Forward contracts on property rights in certificates of origin of energy generated from renewable energy sources were in trading from January 2016 to December 2017 and allowed market participant to secure prices and deliveries of property rights in the future. The volume of trading in property rights on the forward market was 1.1 TWh in 2017 compared to 0.5 TWh in 2016. Forward transactions in RES can be settled on the existing terms up to 3 January 2018.

Register of certificates of origin

The Register of Certificates of Origin is a system of registration and recording of:

  • certificates of origin which confirm that electricity was generated in high-efficiency cogeneration;
  • certificates of origin which confirm that electricity was generated from renewable energy sources (RES);
  • certificates of origin which confirm that agricultural biogas was produced and introduced to the gas distribution network;
  • energy efficiency certificates which confirm that the project improved energy efficiency;
  • and recording of property rights under such certificates.

The main functions of the Register of Certificates of Origin include:

  • to identify entities entitled to property rights in certificates of origin;
  • to identify property rights under certificates of origin and the corresponding quantity of electricity;
  • to register certificates of origin and the resulting property rights;
  • to record transactions in property rights and balances of property rights in certificates of origin;
  • to issue documents confirming property right balances in the register, used by the Energy Regulatory Office for cancellation of certificates of origin.

Certificates Issued and Cancelled (Register of Certificates of Origin)

RES – Green Certificates

The volume of issued green certificates was 24.5 TWh in 2017, an increase of 29.3% year on year. The increase in the volume of issued green certificates was mainly driven by wind energy. Additional generation of wind energy and more efficient issuance of certificates by the Energy Regulatory Office resulted in a significant increase in the volume of issued certificates.

Volume of issued RES property rights [TWh]



The volume of certificates cancelled has been rising but the volume of cancellations in a year depends on the Energy Regulatory Office. The strong fluctuation of volumes results from infrequent notification of cancelled certificated by the Energy Regulatory Office. The total volume of green certificates cancelled was 25.2 TWh in 2017 compared to 16.8 TWh in 2016.

Volume of cancelled RES property rights [TWh]



Cogeneration: Red, Yellow, and Purple Certificates

The total volume of issued cogeneration certificates was 24.0 TWh in 2017, a decrease of 15.2% year on year. Cogeneration certificates of origin report stable volumes in line with expectations. Fluctuations of volumes of cogeneration certificates are natural and were particularly strong with respect to issued certificates in 2017.

Volume of issued cogeneration property rights (TWh)



The total volume of red, yellow, and purple certificates cancelled was 26.9 TWh in 2017 compared to 26.1 TWh in 2016.

In the current legal system, the market of red, yellow, and purple certificates includes three series of instruments with a tenor of 18 months: one full calendar year plus another six months of the following year as required by law for eligible companies to complete mandatory cancellation of cogeneration certificates. There could be differences in trading volumes from year to year because subsequent series of 18-month instruments overlap during the year. The situation is stable from the perspective of an instrument rather than a calendar year. This situation has prevailed over the past few years.

Volume of cancelled cogeneration certificates of origin (TWh)



Energy Efficiency: White Certificates

549 thousand toe of white certificates were issued in 2017, an increase of 17.1% year on year compared to 468 thousand toe in 2016. The volume of cancelled white certificates increased by 13.8% year on year to 148 thousand toe in 2017.

The bigger supply of energy efficiency certificates (white certificates) was driven by the closing of the fifth record-high tender for energy efficiency projects in 2017, which improved the volume of trading as well as cancellations. The increase in cancellations and trade was also driven by changes to the way that white certificates can be cancelled as limitations were imposed on the option of paying a substitution fee.

Number of Participants of the Register of Certificates of Origin

The Register of Certificates of Origin had 3,444 participants at the end of 2017. In 2017, 474 companies became members of the Register of Certificates of Origin (431 companies in 2016).

A large part of the new members are beneficiaries of white certificates (energy efficiency certificates) following the completion of the fifth tender for energy efficiency projects held by the President of the Energy Regulatory Office.

Number of participants of the TGE Register of Certificates of Origin



Number of TGE members

Two new companies joined TGE as members in 2017. TGE had 72 members at the end of 2017. By offering training programmes and examinations for Exchange Brokers, TGE facilitates active participation of members on the market, especially for foreign entities. In 2017, 79 Exchange Broker certificates were issued, including 25 certificates of brokers who passed the examination in English. In 2017, TGE completed 11 training programmes, including 9 programmes for the Exchange Commodity Market and 3 programmes for the Financial Instruments Market.

Number of TGE members



Register of guarantees of origin

TGE operates a Register of Guarantees of Origin and organises trade in guarantees of origin.

The Register of Guarantees of Origin launched in September 2014 and registers energy from renewable sources and OTC trade in environmental benefits of its production. Unlike certificates of origin, guarantees do not involve property rights or a support scheme for renewable energy sources: they are issued for information only. There is no obligation to acquire guarantees but they can be used by entities to prove that a certain quantity of consumed energy was generated from renewable sources. TGE offers trade in guarantees of origin of energy since November 2014.

According to the regulations, the Energy Regulatory Office issues guarantees of origin which are then uploaded to the IT system of the Register of Guarantees of Origin operated by TGE. System users can trade in guarantees of origin or transfer them to end users as proof that energy was generated from renewable sources.

The volume of trading in and submissions of guarantees of origin increased substantially in 2017 while the volume of guarantees registered in the Register of Guarantees of Origin remained stable. The awareness of producers of electricity from RES is rising and so is the interest of international operators in Polish guarantees of origin. The number of participants of the register increased significantly from 255 at the end of 2016 to 330 at the end of 2017.

Register of Guarantees of Origin

 IssuedSoldTransferred
 TWhGWhGWh
20144.87-11
20157.23635732
201612.3591702
201712.625482875

Trade reporting – TGE RRM

TGE offers a Registered Reporting Mechanism (RRM) to electricity and gas market participants under the requirements of REMIT and its Implementing Regulations.

Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency (REMIT) and its Implementing Regulations require market participants to report orders and trades on the wholesale electricity and gas market to the Agency for Cooperation of Energy Regulators (ACER).

Under the REMIT Implementing Regulations, the obligation to report trades on organised trading platforms took effect on 7 October 2015. As of that date, all TGE energy and gas market participants are required to report their orders and trades on those markets. The OTC trade reporting obligation took effect on 7 April 2016.

Under REMIT and its Implementing Regulations, only Registered Reporting Mechanisms (RRM) authorised by ACER are eligible to report trades.

The TGE RRM reporting service supports:

  • reporting of orders and trades on organised trading platforms;
  • reporting of OTC trades.

Until the end of 2017, there were:

  • 15,924,175 reported operations on exchange orders
  • 8,254,186 reported exchange orders
  • 3,158,648 reported exchange transactions
  • Over 95,000 reported OTC transactions
  • Over 107,200 exchange transactions sent to ARIS
  • Over 24,850 OTC transactions sent to ARIS
  • Reporting services for more than 550 clients – ACER has registered 605 entities, which means that we report for more than 90% of participants of the Polish energy market.
  • More than 1,475 users have access to the TGE RRM system.

Financial instruments market

In February 2015, TGE was authorised by the Minister of Finance to operate a financial instrument exchange. The decision of the Minister of Finance allowed TGE to open market consultations on the structure of new instruments. As a result, following the approval given by the Polish Financial Supervision Authority for the terms of trade in electricity futures programmes, TGE launched the Financial Instruments Market in November 2015.

Market participants were offered trade in futures based on electricity prices, later to be followed by instruments linked to the price of natural gas. The terms of operation of the TGE Financial Instruments Market are similar to those applicable for years on the GPW futures market. The underlying instrument is the TGe24 index calculated on the basis of transactions at the first fixing on the Day-Ahead Market in electricity. Eligible as members of the TGE Financial Instruments Market are local and international investment firms and other buyers and sellers of financial instruments acting on own account, provided that they fulfil the conditions of trading on the regulated market.

However, the adoption of MiFID2 and the preparation of TGE and its members for MiFID2 implementation in the Polish legal system required a range of modifications as well as a anew TGE market structure.

Listing of TGe24 futures on the regulated market was discontinued on 29 November 2017. Trade in emission allowances on the TGE commodity market stopped on 30 December 2017 as those became financial instruments under MiFID2. Efforts are underway to move trade in such instruments to the regulated market following the implementation of MiFID2 in Poland. Trade in RES futures on the TGE commodity market stopped on 28 December 2017 as those also became financial instruments. Work is underway to reopen trade in RES futures as a financial instrument on the transformed Commodity Forward Instruments Market following the implementation of MiFID2.

Consultations with market participants were carried out in 2017 concerning proposed modifications to the planned implementation of MiFID2 in Polish national law applicable to the energy and gas market and development of a formula of transformation of the Commodity Forward Instruments Market into an Organised Trading Facility (OTF).

Discretion, which is a specific property of OTFs under MiFID2, was introduced on the Commodity Forward Instruments Market on 29 December 2017. Discretion implemented by TGE means that TGE may increase liquidity of less liquid instruments on the market. Discretion allows TGE to continue the operation of trade on the Commodity Forward Instruments Market and to attract OTC trade in the future. Following the effective date of the law implementing MiFID2, TGE has 12 months to apply to PFSA for a licence to operate an OTF which will replace the Commodity Forward Instruments Market.

The developed solutions ensure harmonisation with the requirements of MiFID2 that is optimal for market members in line with national and EU law. With a view to transformation of the markets and traded instruments under the new legal requirements, and as agreed between TGE and PFSA, IRGiT does not need to become a CCP in order to clear instruments currently traded on TGE.

Clearing

Izba Rozliczeniowa Giełd Towarowych (IRGiT), which is a subsidiary of TGE, offers clearing of transactions of TGE members on its markets.

In 2017, IRGiT continued operations launched in 2010 as an exchange clearing house for the TGE Exchange Commodity Market and operations launched in 2015 as a clearing house and settlement institution for the TGE Financial Instruments Market. IRGiT clears all volumes of transactions in electricity, gas and property rights on the exchange market in Poland.

The total volume of cleared transactions in electricity and gas was 460 TWh in 2017 (including the volume of transactions executed in 2017 and forward transactions executed in previous years and cleared in 2017) while the total volume of cleared transactions in property rights was 47.5 TWh in 2017.

In 2017, IRGiT actively participated in the development of a new model of trade and clearing under MiFID2. IRGiT developed a clearing model for the planned structure of the commodity market which allows market participants to use preferred forms of collateral and existing membership models. The new clearing model under MiFID2 ensures low costs of market participation.

In 2017, IRGiT supported TGE in the implementation of a new trading system dedicated to cross-border transactions. IRGiT developed a risk management model for transactions in SAPRI. The functionalities of IRGiT’s clearing system (X-Stream Clearing), developed and implemented in 2016, ensured that members could offset their credits and debits from transactions on all markets served by IRGiT including cross-border trade.

Information services on the commodity market

Information services on the financial market and the commodity market are described in section regarding Information Services on the Financial Market.