Clean lucre: ARENA funds renewable-energy marketplace and derivatives

The Australian Renewable Energy Intervention announced $845,000 funds to support Renewable Energy Hub market to develop new financial products and world’s first trading platform planned for renewable energy.

The financial products which have evolved around the Australian electricity system value $26 billion — almost $10 billion more than the extensive electricity market itself — but the offshoots associated with traditional fossil-fuel generation have not adapted to suit Australia’s burgeoning renewables sector.

Common financials that help Australian energy retailers to adjust their costs and generators stabilize their revenue include derivatives known as “forwards”, such as futures and swaps, which are based on foretold prices at an agreed time in the upcoming; and “options” such as “caps” — agreements that result in payment to the buyer when the pool price of power exceeds an agreed price.

At the time, Renewable Energy Hub said Solar Shape was “radical” because it isn’t flat like an old-style swap contract, but follows the curve of solar power group as ruled by the movement of the sun.