The truth of the deal is that the choice is in your own hands.
The mid- to long-term transaction schedule for 2023 is coming to an end, and the annual, quarterly and monthly bilateral signing gains and losses are gradually becoming clear in the minds of all transaction parties. Profit and loss are the same, zero-sum game, the happy voices and the frustrated voices in the market should be half and half, but it seems that this is not the case. Why?
Before we ask this question, we need to understand a few things:
What is a Bilateral Negotiated Deal?
Why Bilateral Consultations?
What is the significance of bilateral consultations?
Bilateral negotiated transactions refer to:Independent negotiation between market entitiesThe trading volume, trading curve, transaction **, and the start and end time of contract execution within the allowable range of the trading cycle shall be submitted to the trading platform within the specified time, and the transaction result shall be formed after the transaction verification by the power trading institution. Bilateral transactions are mostly carried out in the form of medium and long term, and the electricity market is mostly based on annual, multi-month (quarterly) and monthly trading cycles to avoid the risk of future spot fluctuations, and combine their own expectations for future spot ** to take their own side in advance** of the range of psychological expectationsLock in a portion of your position. The uncertainty of this forward transaction means that bilateral transactions still have a non-negligible impact on profit and loss.
Taking Shanxi Province as an example, it can be seen from the amount of electricity traded in Shanxi's 2023 annual electricity trading that the scale of the annual bilateral negotiation transaction in the first phase is as high as 15 times that of the second phase of centralized bidding, and the average transaction price of thermal power bilateral negotiation is about 8% higher than that of centralized bidding
Figure 1: Electricity trading transactions in 2023
Figure 2: The average transaction price of electricity trading in 2023 From the perspective of the spot ** level in 2023, the spot price of Shanxi Electric Power is much lower than the initial average transaction price of medium and long-term bilateral negotiation and centralized bidding. The reason for this is not difficult to deduce: market entities are greatly affected by the current year's spot ** level in the process of signing annual bilateral transactions. In 2022, only the spot ** from March to May is low, and from June to October, the spot ** of nearly 5 months is above 400 yuan MWh. The fear of spot ** among market buyer members has not yet dissipated, and the 2023 annual deal has arrived. A part of the market did not hesitate to take 3984 yuan MWh locked in about 40% of the position in advance, which is not reckless. This year's low-cost month can only sweat profusely!It can be seen that the annual bilateral transaction is a double-edged swordThe sign is not good, the day of July-August 44, cold heart, remorse!
Figure 3: 2022 vs. 2023 monthly spot** level comparison
Figure 4: 2022 vs. 2023 Shanxi daily spot ** levelKey takeaways from this article:
1.Two-sided markets are highly valuable, but undervalued by many;
2.The value of the two-sided market is not self-realizing;
3.In a limited space, the choice is in your own hands, and the value of bilateral electricity trading can be realized.
The value of the two-sided market.
Figure 5: Extreme value of transaction transactions in 2023 According to statistics, the transaction prices of the four long-term thermal power bilateral negotiations and centralized auctions in 2023 all show a characteristic: the highest and lowest prices of centralized bidding are covered by the highest and lowest prices of bilateral negotiated transactions. In addition, the difference between the highest and lowest prices of thermal power bilateral negotiations is very large, reflecting the difference between the bilateral signing of different market entities in the same trading month, combined with the amount of electricity traded in bilateral transactions, reflected in the average transaction price of each month, and the degree of impact may be far greater than expected
Taking Shanxi power trading in 2023 as an example, assuming that the monthly electricity consumption of a power sales company is 148,800MWh, that is, the average daily electricity consumption is 4,800MWh, the users are mainly large-scale industrial users, with 24-hour production by default, and the time-of-use power curve is approximately a straight lineThrough the control variable method, the average transaction price in several cases is compared:
High position**, high position low price, low position**, low position low price.
After simulation, the impact of ** and bilateral transaction transactions on the total transaction cost in different months will reach 10-20 yuan MWh. The difference between the configuration of bilateral ** and ** can be described as a world of difference.
The difference in magnitude will affect the bargaining power, that is, the inherent limitation of the market entity's own decision on the scale of power generation and consumption, which is an issue that is easily overlooked in bilateral transactions. This is aptly reflected in the extreme difference in the prices of the two sides. How to fix it?Change your market portrait, and the electricity sales side can try to adjust the scale of electricity to obtain higher bargaining spaceSmall-scale power generation entities can try to combine power generation entities with similar magnitude and negotiate prices.
Information cocoon, transactions "between market players" are limited by the constraints of resources and interpersonal relationships;Combined with the situation of bilateral transactions in the market, during the short trading window between the two sides, it is difficult for some market players to find satisfactory counterparties, and it is inevitable that they will be suddenly released before the end of the transaction, and the process of inquiry and transaction implementation is unpredictable due to information asymmetry.
The degree of attention to the transaction is not enough, the precision is not enough, and it is not accurate. There are too many links in the transaction, and the impact on the profit and loss of the transaction cannot be ignored. The cohesion and combination of trading varieties, the analysis and processing of massive data, and the accuracy requirements of calculation are all great challenges for traders.
Under the premise of the above, are bilateral transactions equal in the electricity market?
It is not completely equal, and there is a phased imbalance, showing a pattern of the power generation side occupying the initiative, while a large number of levels have higher bargaining power, and the bilateral "negotiation" has not really flowed.
How can the trading entity refuse to regret in the future, grasp the option of the transaction within the limited trading operation space, and realize the value of bilateral electricity trading?Value rationality may be a sustainable answer.
Instrumental rationality is result-oriented, emphasizing the maximization of effects. Value rationality, on the other hand, is goal-oriented, emphasizing the purity of motivation and the choice of the right means to achieve one's own ends. The German sociologist Max Weber once distinguished rationality into "instrumental rationality" and "value rationality", and understanding the concepts of the two may better distinguish whether "rationality" necessarily brings "progress" to transactions.
Instrumental rationality is the pursuit of maximizing the efficiency or utility of tools and means, and guiding behavior according to the possible results, that is, correct trading;Value rationality, the chosen behavior is not related to the size of the result it brings, but is related to the value of the action itself, giving this behavior an "absolute value".
To put it simply, in the matter of trading, value rationality is to make the right transaction;Instrumental rationality is to trade correctly.
Excessive "instrumental rationality" has also brought disasters to mankind, such as modern warfare, plundering resources, and human rights violations. The return of value rationality is a reflection on modernization, and it makes people start to think about what is the ultimate goal of instrumental rationalityHuman beings have evolved from the age of fire to energy power generation and then to the shine of new energy today, the eternal core value of electricity is to ensure survival, and the existence of the power market is to further optimize the allocation, ensure safety, and implement the development strategy, undoubtedly power trading is one of them. Therefore, the subjectivity of power trading should be strengthened outside of rationality, and instrumental rationality may not be able to accomplish such a task, and it can only be achieved by relying on value rationality.
1.Macroeconomic 2024**
In 2023, the international political and economic game will intensify, the domestic economy will face the impact of multiple risk factors, and market confidence will not be fully restored, although there are many difficulties and risks, but the overall situation of China's economic and social development will remain stable, the vitality of the supply side will be released, and the demand side will gradually begin to recover, and it is expected that China's economy is expected to rebound in 2024, but the economic upward trend lacks certain strong support, and the pressure will not be dissipated in the short term.
From a macro perspective, it is good for power-related industries, investment in the new energy industry remains strong, and the electricity consumption of the whole society is expected to grow steadily and slightly.
Since 2023, the industry has faced the triple pressure of pressure on profit growth, insufficient demand repair, and slowdown in production growth, and industry has become the key point for economic growth to stabilize. In the process of moving from balance of payments to stable economic growth, the industrial policy in 2024 will still focus on steady industrial growth, focusing on the ten key industries as the starting point, and helping industrial growth recover from both supply and demand. In the third quarter of 2023, the Ministry of Industry and Information Technology, together with relevant departments, formulated a work plan for the steady growth of 10 key industries, and has clear guidelines and relevant supporting policy support for the growth rate, revenue, and sales volume of industrial added value in steel, nonferrous metals, petrochemicals, chemicals, building materials, machinery, automobiles, power equipment, light industry, and electronic information manufacturing industries in 2023 and 2024. The policy of steady industrial growth focuses on stabilizing key subdivided industries, which are large-scale, strong and highly correlated.
2.Research and judgment on coal prices and power generation and consumption
In terms of coal prices, according to the data of the National Energy Administration and the research report of financial institutions, the slowdown in the release of coal nuclear capacity and the resilience of demand are expected to reduce the fundamentals of thermal coal in the second half of 2024, and the market coal ** center in 2024 may remain above 900 yuan tons. Especially in the third quarter, there may be a wave of more obvious inventory depletion. In 2024, the market coal ** hub may remain above 900 yuan tons, and the thermal coal market ** is estimated to be yuan tons in the four quarters of next year.
In 2023, the domestic thermal coal market will be booming in both supply and demand. On the demand side, the reopening of the economy has boosted electricity consumption, and although wind and solar power generation has maintained high growth, the gap caused by weak hydropower output in the first half of the year is still covered by thermal power, and the share of coal power in 2023 may be basically the same as last year. On the supply side, domestic raw coal production has maintained a high growth, and the average daily raw coal output is expected to reach 12.7 million tons. Import resources are relatively abundant, and the profit of the import window is opened after the sharp decline in overseas coal prices, and the annual growth rate of coal and lignite imports is expected to reach 4600 million tons, a growth rate of 57%. However, supply-side concerns have also begun to emerge, such as the resurgence of safety supervision pressure and the marginal cost support of overseas coal prices. Purely from the perspective of the balance between coal supply and terminal demand, the growth rate in 2023 will be slower than demand, but the inventory of power plants is at a high level, the long-term supply is guaranteed, and the power to replenish the warehouse is weak, so the support of coal prices will be greatly weakened.
Electricity resilience is likely to rise in 2024. Looking ahead to 2024, resilient economic growth is likely to continue to support electricity demand. It is expected that the growth rate of electricity consumption in the whole society will be about 5 next year5%, corresponding to an elasticity coefficient of electricity consumption of 111, compared to 1 this year06 has rebounded. On the one hand, with the support of fiscal policies such as the issuance of additional treasury bonds and the transformation of urban villages, it is expected that the growth rate of fixed asset investment will accelerate next year, which will leverage infrastructure and benefit related industries such as metallurgy, building materials, and chemicalsOn the other hand, the overseas manufacturing industry has opened up to replenish inventory, and the decline in exports may narrow or even turn positive, which is good for manufacturing exports. Therefore, it is expected that the secondary industry with a higher electricity elasticity coefficient will benefit from it next year, thereby improving the energy intensity of GDP. Non-electricity coal consumption will also be supported.
The share of thermal power continues to shrink, but it has not yet peaked. Next year, the installed capacity of wind and solar power may continue to grow, and under the assumption of a relatively neutral utilization hours, wind and solar power generation may maintain a high growth, but it cannot be ignored that the power grid will still have a relatively large pressure on the absorption of high wind and solar growth in the short term. In terms of hydropower, historically, the second year of El Niño tends to have more abundant rainfall, and if the water supply improves significantly, hydropower output may increase significantly from this year's low base. The increase in wind, solar, and hydropower generation will squeeze the proportion of thermal power, but considering the intermittency and volatility of renewable energy output, as well as weather uncertainty, the role of thermal power as a "ballast stone" cannot be ignored to ensure electricity consumption during peak hours. It is recommended to flexibly allocate thermal power and new energy bilateral electricity**, and trade cautiously.
3.A brief analysis of the impact of the introduction of the coal-fired capacity electricity price mechanism on electricity prices
The National Development and Reform Commission (NDRC) and the National Energy Administration (NEA) jointly issued the Notice on Establishing a Capacity Electricity Price Mechanism for Coal-fired Power Plants, deciding to implement a two-part electricity price policy for coal-fired power from January 1, 2024. In the future, the electricity price of coal-fired power units will be formed through marketization, and the capacity price level will be gradually adjusted according to the actual situation such as the progress of coal-fired power transformation, and the mechanism of coal-fired power will undergo major changes.
For the relatively mature competition in Shanxi's electricity spot market, under the pattern of increasing proportion of market-oriented electricity transactions, high transaction frequency and rich variety, the capacity electricity price will inevitably affect the market behavior of competitors. Compared with the existing market mechanism, the introduction of the capacity electricity price policy will help to expose more accurate and real short-term signals, better reflect the boundary conditions of the spot market, and the spot market clearing can better conform to cognition and be easy to explain. At this stage, the benchmark price of coal-fired power generation has reflected the value of capacity to a certain extent, and the implementation of the capacity price mechanism will promote the separation of capacity value from the value of electric energy. Coal-fired power units have gained some relatively stable profit margins due to capacity electricity prices, and it is an inevitable trend for power generation companies to reduce the benchmark price of coal-fired power when they can also obtain sufficient profits according to the short-term marginal production cost in the electricity energy market. At the same time, in the electricity competition in the spot market, the spot market** will be lower, and there is a high probability that the amount of electricity that will be stripped of capacity value will show a downward trend.
The annual bilateral deal is quietly coming, let's wait and see how the bilateral deal will end in 2024!