Free Simple Glossary of Energy Trading terms

When two parties execute a trade between themselves they specify the terms of the trade: Price, Volume, Location, timing etc.

But in order to successfully manage the trade's delivery and settlement a lot more information needs to be available than is captured in the trade details, such as when payment is due, who needs to notify a TSO etc.

This additional detail is held in a Master Agreement

Each trade that is executed is regulated by a Master Agreement

For much more information please refer to the Detailed Glossary

To hedge is to offset, mitigate or reduce a risk or risks of an organization or individual by entering into contracts or trades

A hedge is a trade or contract intended at least partly to reduce risk

In Energy Trading the risk is usually market risk associated with other trades or contracts, or the operation of assets

For much more information please refer to the Detailed Glossary

Volume is the measure of how much of something is involved in a trade

Volume = Quantity (but the term Volume is nearly always used in preference)

Hence in energy trading volume may have dimensions of energy, mass, weight or volume

For much more information please refer to the Detailed Glossary

An Order is an instruction sent to an Exchange or a Broker to execute a trade unconditionally, or when or if specific criteria are met

For much more information please refer to the Detailed Glossary

An Index is a set of prices that are published for a commodity or product, usually derived from trading data, using an open and independent method

For much more information please refer to the Detailed Glossary

Capacity is a type of commodity associated with gas and power, and gives a trading organization the option to "move" gas and power through the respective networks (pipelines and grids)

For much more information please refer to the Detailed Glossary

In Energy Trading a Market describes a standardized trading environment for a commodity and a geographic zone

The geographic zone is not necessarily the delivery location, but usually determines the valuation of the traded commodity

For example API#2 is a market based on the published index for coal in the Amsterdam, Rotterdam and Antwerp (ARA) location; a trade may deliver coal to a port in France but still be part of the API#2 market

For much more information please refer to the Detailed Glossary

Shape is a term, mainly used in Power Trading to describe a non-continuous delivery over a delivery period

For example a UK power trade may have a delivery period of a month and have peak shape, which specifies that the power will be delivered over a time period of 07:00 - 23:00 each day of the Month

For much more information please refer to the Detailed Glossary

In Energy trading a Product is a standardized type of trade which may be offered by an Exchange, quoted by a Broker, or be the subject of a published Index

For much more information please refer to the Detailed Glossary

In Energy Trading terms Power is almost always synonymous with Electricity

In physics terms power is a measure of the rate of energy conversion per unit time

For much more information please refer to the Detailed Glossary