The term Ahead associated with a forward or futures product identifies the 'next' product that is fully available for trading on today's date, the delivery period for which has not yet commenced.

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Bearish movement

In terms of market prices, a bearish movement is a situation in which prices move downwards, i.e. fall. A bearish movement can be of short duration or, conversely, of long duration (trend).

Bearish trend

The trend ribassista indicates a period in which the prices have a strong and continuous push to the decrease and in which the identification of a level of minimum (beyond which the prices will not come down) is denied from the prosecuzione of the movement. In these phases the prices of all the curve forward (and often also of the spot) go down they go up with a sure homogeneity.


In energy trading, but more generally in financial markets, the 'bid' is the price that a counterparty is willing to pay to buy a product. It is the opposite of the "ask" (or "offer"), which is the price at which a trader is willing to sell a product. Who wants to buy tries to get a lower price, who wants to sell pushes for a higher price. This is why the Bid is always lower than the Ask. The greater the need to close the transaction, the greater the willingness of the parties to raise/lower the trading price.

The BID/ASK is the difference between the highest Bid (i.e. the Best Bid) and the lowest Ask (Best Ask) and identifies the implicit transaction cost, imagining to open and close (buy and sell) at the same time. The BID/ASK is a very important indicator of market liquidity: the smaller the difference between Best Bid and Best Ask, the greater the liquidity.


A broker is an individual or company that takes a commission to execute an investor's buy or sell orders. The purpose of the broker is to facilitate transactions, to find a counterparty willing to negotiate with a seller/buyer expressing a need and to facilitate the matching of supply and demand.


BULL: This term is used because the bull, when charging to attack, does so from the bottom up. BULLISH: This term indicates a uptrend market movement, i.e. the tendency of traders is to buy and the more traders try to buy the more the purchase price rises.

BEAR: This term is used because the bear, when it attacks, from an erect position, lowers itself with the entirety of its mass on the prey. BEARISH: this term indicates a downtrend movement of market, that is the tendency of the operators is the sale and more operators try to sell more the price of sale diminishes.

When a market is going through a trajectory in ascent or descent with little hope of changing the tendency, apart from the technical bounces, or with particularly marked movements, it is spoken of a market respectively bullish or bearish.

Bullish movement

A month ahead refers to the first monthly product (from the first to the last day of the month inclusive) available and tradable on today's date. E.g. in October 2020, the month ahead is the product month November 2020 (from 00:00 on 01/11/2020 to 24:00 on 30/11/2020).

Bullish trend

One speaks of a bullish trend when the prices tend to rise with continuity, reaching always higher values and, in spite of the volatility, the temporary phases of decrease are always much weak regarding the phases of push to the rise. In these phases the prices of all the curve forward (and often also of the spot) go up with a sure homogeneity.

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Capacity Market

The capacity market is a mechanism through which the electricity grid operator procures flexibility resources with the aim of ensuring the security of the system and the availability of energy at all times and in all areas at times of criticality In this market scheme, electricity generation plants are remunerated for undertaking to make available a certain production capacity in the event of grid needs.


The European ETS is based on the cap-and-trade mechanism: a cap is set on the amount of emissions that can be generated by ETS participants and within this cap, emission allowances can be traded between operators (TRADE).
The cap is reduced over time to ensure that fewer and fewer emissions are allowed, guaranteeing that the allowances in circulation have a value greater than zero and that installations have an incentive to reduce their emissions.

Credit risk

Credit risk is the risk that one of the two parties will not pay what is due. In a supply contra,ct it is, therefore, a risk to which the supplier is subject and is the reason why the supplier often requires a bank or insurance guarantee to cover the risk of non-payment by the customer.


The closing (price) is the closing price of a product within a trading market such as gas, electricity or coal. Specifically, it is the last price at which the product was traded during the day.

Consumption profile

The consumption profile is a graph or, more often, a numerical table showing how much the user consumes every hour (for electricity) and every day (for gas), throughout the year. Typically, the hourly consumption profile is aggregated on a monthly basis to be usable and summarise a customer's electricity or gas consumption. When an offer is requested from a supplier, the consumption profile is as decisive as the overall quantity consumed.
The consumption profile is closely dependent on the type of activity for which the energy or gas is used. For example, a large service company, such as a bank, is likely to consume most of its energy during the 10/12 working hours of the day, Monday to Friday. A 24-hour industry, on the other hand, will also have significant consumption at night and at weekends. Each activity, industry or company will therefore have a different and characteristic consumption profile.  


Contango indicates a situation in which forward prices increase as the maturity date moves away from the current point in time. Thus, spot and short-term prices are lower than those of products with a long-term maturity. This market condition is the normal one for commodity forward prices - leaving aside for a moment the particularities of gas and electricity - and indicates a standard supply and demand situation. The reason why prices of products with longer maturities are higher is usually due to a number of factors typical of physical commodity markets, including the costs of storing commodities while waiting for them to be physically delivered to a buyer.

Counterparty risk

Counterparty risk is the risk that one of the two parties is unable to fulfill its contractual obligations and is, more specifically, the risk that the supplier can no longer supply energy or gas as contracted.

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Day Ahead

The term day ahead, in general, refers to the market of the day before. In pricing formulas, the term Day Ahead indicates the price that was formed for the daily product on the market the day before. For example, the TTF Day Ahead index is the average of the daily prices of the TTF according to the index formula.
Referring instead to the Day Ahead product, the term indicates the first daily product (if we are talking about electricity, the daily product is from 00:00 to 24:00) available and tradable on today's date. E.g. on 1 October 2020, the day ahead is the product 2 October 2020 (24 hours).

Day-Ahead Market

The Day-Ahead Market is the electricity market on which trading (purchases and sales) takes place for the following day through an auction mechanism. The price formed on this market is the PUN, i.e. the Single National Price, and is the equilibrium price at which demand (bids) and supply (offers) meet.


The term delivery in the energy field is used to define two related but slightly different concepts.
  1. The physical delivery of gas or electricity. For example, if we talk about a supply contract or a forward product, we say that delivery has "started" or that it has "gone into delivery" when the electricity or gas that is the subject of the contract begins to be physically delivered.
  2. The concept of delivery is used in a broader sense, when speaking of the delivery period, i.e. it refers to the time when the delivery of energy or gas is expected to take place. In this sense, the term "delivery period" is used to identify the entire time span in which delivery is expected and can be used both in reference to physical products, i.e. those which actually provide for the delivery of energy or gas, and, by analogy, for financial products which have a defined duration (delivery).

For example, when one speaks of the forward product or future Calendar 2021, one identifies that specific product that provides for delivery from 1/1/2021 to 31/12/2021, whether physical delivery is foreseen, or whether it is a purely financial product. Similarly, the term "delivery month", for example, refers to a supply that is physically delivered in a specified month, at the end of which consumption is calculated and subsequently invoiced.

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EUA (Emission Unit Allowances)

It is a certificate that represents a share of CO2 emissions (1 EUA = 1 tonne of CO2 equivalent). EUAs were introduced by the Emission Trading Scheme to ensure that obligated parties have to pay for the right to emit CO2 into the atmosphere, thus promoting investment in less emissive and environmentally damaging technologies.

Emissions Trading Scheme (ETS)

The Emissions Trading Scheme (ETS) is the European system for trading greenhouse gas (in particular CO2) emissions. It was introduced in Europe in 2005 as the main instrument for reducing CO2 emissions and meeting the targets set out in the Kyoto Protocol and later in the Paris Agreements. These targets now stipulate that European emissions must be drastically reduced (-55% compared to 1990 emissions) by 2030. Entities subject to ETS obligations are obliged to buy CO2 allowances on the market, thus paying for their right to emit greenhouse gases into the atmosphere. The cost of CO2 emissions is intended to be a disincentive and a way to promote investment in cleaner, less emitting technologies.

Energy transition

The energy transition is the complex evolution of electricity production from fossil fuel technologies to green technologies with a lower environmental impact (renewable energies). The energy transition also includes a new understanding of energy use, which is more rational, contained and optimised through energy savings and efficiency measures.

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When having a variable price B2B gas or electricity supply contract, the contracting company may request to fix the price to its supplier. This involves fixing the price of a part of the volumes or of the entire consumption profile foreseen in a given future period at the economic conditions of the market at that time. The fixing, in effect, allows the consumer to transform an indexed price contract into a fixed price contract (in whole or in part), eliminating the risk of a price rise and the consequent increase in supply costs.


This is a technique used mainly in the USA for extracting oil and gas, which involves fracturing the rocks in a well through the use of fluids (such as water) at high pressure. Once the well has been drilled, water mixed with other components is injected at very high pressure to crumble the surrounding rocks, enlarging the extraction area and thus the flow of oil/gas extracted from the individual well. While this technique increases the amount of oil or gas extracted, it can also cause environmental damage, groundwater pollution and earthquakes.

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Guarantee of Origin (GO)

This is a label that certifies the origin of a single MWh of electricity from renewable sources. In order to obtain electronic certification, plants must be qualified by the local national body as IGO plants (Plants with Guarantees of Origin). Each single MWh produced, therefore, is certified and associated with a guarantee of origin, which is a title that can be sold by the producer to whom it is assigned in two different ways. On the one hand, the GO can be sold together with the energy produced, which is then sold as "renewable energy" to customers. On the other hand, the title can be sold separately from the energy and used to "clean up" and green the electricity sold or used by the person who bought the GO. In this way, anyone wishing to buy green energy can be sure that every single MWh has been produced by a certified renewable plant, in Italy or abroad.

Grid parity

Grid parity occurs when the cost of electricity produced from renewable sources is equal to the cost of electricity produced from conventional sources (fossil or nuclear). Grid parity is essential to ensure that it is economically viable to invest in renewable rather than conventional power plants without the need for incentives.

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A hedging transaction, whether of a portfolio, a sale or a purchase, which limits the risk of losses associated with the transaction entered into, usually using derivative products.
A hedge can be made to cover price risk, volume risk or other risks, such as foreign exchange risk.
In relation to supply, a customer can hedge its future consumption by going to the market to buy a financial product at a fixed price that covers volumes being purchased at a variable price, avoiding that an increase in market prices leads to higher costs. Another way, perhaps more common, is to use fixing to hedge against the risk of a price rise.
On the supplier side, instead, at the moment when a customer signs a fixed price contract or makes a fixing, the operator does hedging by going to buy at a fixed price the same quantity of gas (or electricity) on the market (with physical or financial products), limiting the possibility that the price rises and finds itself uncovered.


A hub is a central element, or junction. This term is used in the world of gas, to indicate the "market" or that place (centre or hub) where gas transactions take place. A natural gas hub can be a physical place, and in particular is usually the point of interconnection where two or more pipelines are connected, generally managed by different TSOs (acronym that stands for Transmission System Operator or high pressure gas transmission system operators, such as Snam in Italy). For example, on the border between two countries, such as Italy and Austria, there is the Austrian hub of Baumgarten and the Italian hub of Tarvisio, where the transit of gas between the two countries physically takes place. A physical hub can also be a financial one, i.e. a point of exchange of not only physical but also financial consignments of gas, with a specific location (in the example above, for example, the border between Italy and Austria, on the Italian or Austrian side). One speaks, then, of virtual hubs when one refers to the negotiation of the gas lots within a specific State, and therefore, the hub is the perimeter within which the gas is localized (the PSV, in Italy, is, in fact, the virtual hub on which the gas is negotiated with delivery in Italy, or, to put it better, with delivery on the Italian high pressure transmission network).  

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This is the imbalance between the expected consumption (or production) profile and the profile that is actually consumed (or produced). When a certain amount of electricity or natural gas is planned to be consumed (or produced), this amount must be bought (or sold) on the market. If more/less is consumed/produced than budgeted, the quantity of energy or gas in excess or shortfall is withdrawn or injected directly into the grid in real time and must subsequently be paid for, if withdrawn, or remunerated, if injected.

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The term liquidity is used to describe the number of players operating in a given market/trading a given product. The greater the liquidity, the easier it is to buy or sell a product/commodity (gas, electricity, coal, etc.) without affecting its price. An indicator of liquidity is the market bid/ask. 


A 'long' financial or physical position corresponds to a buying position (the trader has bought and 'is long', i.e. he has bought the product and, owning it, can sell it). With respect to a B2B customer, a supplier will have a 'long' position if, having purchased the necessary gas or energy for the customer, the customer consumes less than expected. That is, the supplier has more energy/gas than necessary and will have to sell it on the market.

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Market Order

In energy trading, a market order is an instruction from a trader to a broker or the placing of the order on a market platform to execute a purchase or sale instantly at the best possible price. Transferring the concept to a gas or electricity supply, it can be said that a B2B customer with a variable price contract, when requesting a fixing is effectively placing a market order. 


A producer is an entity that produces electricity. Producers may be natural persons (for some types of renewable plants) or, more often, legal persons.

Month Ahead

A month ahead refers to the first monthly product (from the first to the last day of the month inclusive) that is available and tradable on today's date. E.g. in October 2020, the month ahead is the November 2020 product month (from 00:00 on 01/11/2020 to 24:00 on 30/11/2020).

MSR (Market Stability Reserve)

The Market Stability Reserve (MSR) is a mechanism introduced by the European Union from 2019 whose purpose is to reduce the number of outstanding emission allowances (EUAs) in order to decrease supply and thus artificially support prices. The RSM was introduced as a result of the low price levels of emission allowances in previous years, which did not adequately stimulate investment in clean and less emissive technologies

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Price risk

Price risk is the issue to which both suppliers and customers are most sensitive. It is the risk of paying too high or more than the expected price for energy supply. If the concept seems straightforward when you put yourself in the shoes of a customer, it is perhaps less so when you put yourself in the shoes of a supplier. The supplier, in fact, when a customer requests a fixed price supply or fixing, must in turn manage the risk of buying the energy or gas he has contracted at a higher price than the selling price.


For a trader, a position is the consequence of buying (long position) or selling (short position) on the markets. It is a financial term for an order that is currently likely to generate profit or loss (open position). The concept of position can also be found in the retail market: suppliers have a position which is the net between the electricity (or gas) sold to customers and the electricity (or gas) bought to supply them. To avoid incurring margin squeezes, suppliers purchase quantities based on estimated customer consumption profiles, so as not to over- or underestimate how much they actually have to supply. At the time of consumption, of course, customers may consume with different profiles than expected and this generates a difference between estimated consumption and actual consumption, i.e. a position that suppliers have to manage on a day-to-day basis.

PPA (Power Purchase Agreement)

A PPA is a power purchase agreement between the owner of a generation plant (usually from non-programmable renewable sources) and a buyer (usually a wholesaler). The duration of a PPA is quite variable (ranging from 2-3 years to 10-15) and allows the producer to stabilise revenues in the medium term and thus ensure the financial sustainability of the project.


A producer is an entity that produces electricity. Producers may be natural persons (for some types of renewable plants) or, more often, legal persons. 

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Quarter Ahead

First quarterly product available on the trade date. Conventionally, the tradable quarters are called Q1 (January-March), Q2 (April-June), Q3 (July-September) and Q4 (October-December). For example, in January, the Quarter Ahead is the first (i.e. the closest) quarter that can be traded among the four standard quarterly products just mentioned, i.e. Q2.

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Raw material

A raw material is a material or good that forms the basis of a production, transformation or manufacturing process and is its essential element. Raw materials tend to be materials that occur in nature in a raw state and are extracted/picked/collected for use in industrial processes. For example, natural gas or (crude) oil are raw materials. Electricity, on the other hand, is not a raw material in the strict sense of the word, since it is the output of a transformation/production process and not a naturally available resource, but it is often equated with a raw material because of its pivotal importance in industrial production processes. Precisely because raw materials are the starting point of several production processes, any fluctuation in cost has a major impact on the cost of the finished product.

Request for an offer

When an industrial customer needs to enter into a contract (new or renewal) for the supply of electricity or natural gas, he must contact one or more suppliers to request an offer. This means that the customer provides the essential data on his consumption and other general information to the selected suppliers to enable them to produce a supply offer according to the required criteria (fixed or variable price, duration of one or more years, with or without guarantee, ...). An offer is a document in which the supplier describes in detail the economic conditions, general conditions and special conditions that the customer will have to accept when accepting the offer.

Retail market

This is the market where suppliers (sellers) enter into contracts for the sale of electricity or natural gas, both with business customers, such as industries or enterprises, and with retail customers, i.e. households. This is the last segment of the value chain, beyond which the raw material (gas or electricity) is consumed.  In this market, unlike the wholesale market, the supply of electricity or natural gas has customised profiles (each customer consumes with its own specific profile and therefore a price is contractually negotiated for the customer's actual consumption) and prices include not only the cost of the raw material, but also transport/transmission/distribution tariff components, charges and excise duties. Following the liberalisation of retail markets, the number of operators, large or small, active in the sale of energy and gas has increased steadily.

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A financial or physical 'short' position corresponds to a selling position (the trader has sold and is 'short', i.e. has sold the product and does not own it and has to buy it). With respect to a B2B customer, a supplier will have a 'short' position if, having purchased the necessary gas or energy for the customer, the customer consumes more than expected. That is, the supplier will have less energy/gas than necessary and will have to buy it on the market in order to deliver it to the customer.

Sideways trend

The trend lateral is a period in which the prices oscillate around to a medium value or to the inside of one constituted band from the maximum and the minimal price caught up in the period. When a trend is lateral it is not possible therefore to identify one tendency rialzista or ribassista of medium/long term.

Spot and Futures/Forward markets

Whether in the gas or electricity market, spot prices on a given day correspond to the price of products delivered on a short term basis, tending to be the next day (Day-Ahead). The spot price is the reference price of supply contracts indexed to PUN day ahead or PSV (or TTF) day ahead.
Futures or forward prices, on the other hand, concern products with a delivery period that is further away in time (other than "today" or "tomorrow") and which may, therefore, be traded several times before the start of delivery. Forward prices are an image of the expectation that operators have for the spot prices that will be achieved over the period considered (e.g.: the price of the product December 2020 electricity Italy is the best prediction of what will be the average price of the PUN for the month of December). Future/forward prices are used as a reference for fixed-price offers for the supply of gas and electric power to B2B customers.

Stop Loss

This term denotes a transaction (purchase or sale) by which you end your exposure to market price movements. The 'stop loss', literally 'stop loss', closes a position that generates a loss in order to prevent market movements from causing further damage that is deemed unacceptable.

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Take profit

This term denotes a transaction (purchase or sale) whereby you end your exposure to market price movements. A 'take profit' closes a position that is generating a profit, in order to consolidate the expected profit and not to risk that market movements could erode the positive margin obtained or further damage deemed unacceptable.

Technical rebound

A technical rebound is a movement of market prices in the opposite direction to the current trend.  A technical bounce can be had when the price is approached to a particular level (the so-called floor, that is a lower price that makes from minimum, if the tendency in action is a decrease, or the cap, that is a higher price that makes from roof to the movement if the tendency in action is a rise) in proximity of which it is inverted the tendency of descent or rise that there has been until that moment. It is spoken about technical bounce because often it is through the technical analysis that the levels of price that potentially can invert the tendency can be identified, with an impact momentary or of long term.


Tendering is the overall activity of organising a tender. In the world of energy and gas, specifically, tendering concerns the organisation of a session, defined in time, in which a customer requests a supply offer from several suppliers with the aim of comparing the offers received and thus selecting the most competitive supplier.

The fundamentals of energy market prices

What are the fundamentals of energy market prices? When analysing the price dynamics of wholesale electricity and natural gas markets to understand how they may evolve, reference is made to fundamentals when examining the elements that make up supply and demand for the commodity. Fundamentals are contrasted with speculative or psychological elements that have an impact, often short-term, on prices without affecting the balance between supply and demand. For example, when talking about electricity, a fundamental element is the cost of gas as the raw material used, especially in Italy, to produce it. For gas, on the other hand, one of the key elements is the gas imported into Europe through the pipes that connect it to fields in neighbouring countries such as Russia.
The YEM platform, You're Energy Manager, describes these fundamentals in dedicated articles.


A trend is also referred to as a trend When market prices follow a clear, sustained and protracted upward or downward movement, it is called a trend. Identifying the beginning and end of market trends is one of the key roles of market analysis.  Normally, a trend that is observed on one asset class (e.g. front quarter gas TTF), with more or less strength extends to all points on the forward curve, due to generalised operator sentiment and/or changing fundamental conditions, and can also propagate to neighbouring or related asset classes (e.g. Italian gas and power).

Trend reversal

When the market follows a trend for a period of time and with a marked direction, the moment when the movement stops and prices start moving in the opposite direction is called a trend reversal. Unlike the technical rebound, the trend reversal is a movement that has an appreciable duration and starts a new trend in the opposite direction to the previous one. If the trend is to the decrease it is spoken about reversal of trend in the moment in which the prices begin markedly to go up again, vice versa, if the trend is to the rise, the reversal of trend is had when the prices begin to diminish.


The term TTF (Title Transfer Facility) identifies the virtual trading point for natural gas located in the Netherlands. The TTF market is the most liquid market in Europe and is taken as a price reference in all less liquid European gas hubs. The TTF is often a reference for the indexation of LNG cargoes to Europe because, due to the high liquidity, both buyers and sellers can easily hedge price risk with futures products, even on quite long maturities.

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Variable, indexed or floating prices

When are prices variable or fluctuating? A B2B gas and electricity supply contract is a variable price contract if the price of the raw material (molecule or electron) is not established a priori before consumption but is instead subject to variations due to market movements. The contract specifies exactly what the reference prices are that determine the cost of the energy or natural gas consumed.

VaR (Value at Risk)

VaR (Value at Risk) is one of the best-known methodologies for measuring the price risk inherent in a portfolio, whether for consumption, production or trading. VaR is used to assess the maximum loss that can be incurred in a portfolio in a given time interval (usually 1 or 10 days) and with a certain degree of probability (confidence interval normally 95% or 99%) due to market price movements. Thus, it is possible to have a measure of how much you can lose at most in the next N days and with a probability of X%. There are various models for calculating VaR, such as parametric VaR, historical VaR or the Monte Carlo method.


The volatility of a market represents the magnitude of price movements over a given period of time. The greater the volatility, the greater the likelihood of experiencing significant and unexpected price movements, either upwards or downwards. For a B2B consumer, negotiating the price of a gas and electricity supply in a period when the commodity market is very volatile can be riskier, because the wide price fluctuations mean that in a very short time, the price agreed can be very far from the market price.

Volume risk

The volume risk is the risk that the volumes forecast during the contractualisation do not correspond to the volumes actually consumed by the customer. The volume risk has an impact on both the supplier and the customer. The supplier, in fact, when purchasing energy or gas for the customer, relies on a consumption forecast which, if not met, may lead to higher procurement costs. For the customer, the volume risk is both the risk of consuming more than expected (and therefore paying a bill for more than expected consumption) and the risk of consuming more in periods when the cost of energy or gas is higher.

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Week Ahead

First weekly product (with delivery from 00:00 on Monday to 24:00 on Sunday) available on the trade date.

Wholesale market

The wholesale market, in the value chain, is upstream of the retail market (or sales market to end customers) and is a market where only qualified or professional operators are present. Wholesale market transactions are characterised by higher volumes than the retail market (GWh or TWh) and the products traded have standard characteristics of quantity (minimum size 1 MW) and profile (baseload for gas and baseload/peak/off-peak for electricity). The wholesale market is also a financial/speculative market, i.e. batches of electricity or gas can be traded several times by traders in order to profit from price movements. On this market, producers or sellers of electricity or gas also operate to source and hedge (or, more commonly, to 'hedge') their production or sales portfolios to customers. It is precisely for this reason that the prices formed on the wholesale market are used by suppliers as a reference for their sales prices to customers.

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Year Ahead

Refers to the first fully available product of one year's duration (i.e. from 00:00 on 1 January to 24:00 on 31 December) on the trade date.

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