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The months-long European energy crisis that has captured international attention is only getting worse in 2022.
A growing focus on climate activism & under-production of fossil fuels combined with unexpected cold weather has sent European gas prices into the stratosphere, resulting in dangerously expensive power bills for the vast majority of the continent’s consumers:
(Source)
With ESG support growing stronger by the day, gas exporters choosing Asia & Latin America over Europe, and now an impending Russian invasion of Ukraine, many are predicting an energy supply shock that could last for years instead of weeks or months.
Europe’s energy debacle lies at the center of a surprising amount of global narratives - climate change, politics & bureaucracy, Brexit, evolving technology, trading & speculation, and war.
What industry also lies at the center of the European energy crisis? Exchanges, of course! A race to modernize & electronify the European energy market has been underway in the exchange industry for many years now, with recent volatility serving as the race’s high profile coming out party. This winter may be the first time you’ve ever heard the words “TTF”, “Endex”, “EEX” or “Trayport” - all equally critical parts of today’s European energy market structure. This post takes a deeper look at that market structure and the exchanges that are set to dominate it for the foreseeable future.
To get the full context we need, we’ll begin with a bit of history:
The Birth of TTF
The European gas market began as a closed, monopolistic collection of local utilities. Quasi-government entities would discover new gas fields, extract resources & transport them through a vast array of pipelines to their end consumers. In the Netherlands this entity went by the name of Gasunie, a joint venture owned by ExxonMobil, Royal Dutch Shell & the Dutch government. Gasunie sold & distributed the vast majority of gas in the Netherlands through its nearly 10,000 mile long pipeline network, operating in an effective regulatory monopoly from its formation in the 1960s to the turn of the millennium.