By Lars Paulsson – Bloomberg
APX-Endex Holding BV, the Amsterdam-based energy-exchange company, plans to offer biomass trading starting next quarter as utilities seek alternatives to fossil fuels to burn at power stations.
APX-Endex, whose spot power and gas volumes were worth about 5 billion euros ($7 billion) last year, will offer wood pellets contracts, with physical settlement to be arranged between counterparties based on their existing trade agreements, Chief Operating Officer Pieter Schuurs said yesterday at a presentation in London.
“It’s a small product compared with power and gas, but it’s interesting enough,” he said.
Biomass is the cheapest way for the Netherlands to generate renewable electricity, APX-Enex and its partner Port of Rotterdam said in July when they signed a letter of intent for the project. Governments across the world are promoting and subsidizing renewable energy to reduce greenhouse gas emissions from power generation.
APX-Endex began a wood-pellets index in 2008 and 15 traders including German utilities E.ON AG (EOAN) and RWE AG (RWE) submit prices on a weekly basis. Year-ahead delivery of wood pellets exceeded 140 euros a metric ton in February 2009 and was valued at more than 130 euros in February, according to slides at the presentation.
The traders need to agree on standardized quality and specifications for the contracts before trading can begin and an accord may be reached by the middle of this year, Schuurs said.
Cleared biomass trading products, in which a central counterparty guarantees the settlement of trades, may be introduced in the first quarter of 2012, he said.