Energy market lingo
Energy market lingo can be complex and full of jargon, making an already difficult subject more challenging. Below are some simple definitions for terms you might come across when reading wholesale energy market intelligence reports. We hope you find it useful.
What does Day Ahead Market Price mean?
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- The Day Ahead Market Price is the kwh price of wholesale gas or electricity for the next day, i.e. tomorrow. In theory, the Day Ahead Price should be the truest reflection of the current market price as it should exclude any risk premium for future forecasting of unknown events such as weather or energy infrastructure issues, as the price is for tomorrows energy only.
What does Spot Market mean?
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- Gas or electricity for delivery on the same trading day.
What does Prompt Market mean?
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- Gas: Includes contracts for delivery on the same day, the next day, weekends, and the rest of the month.
- Electricity: Includes contracts for delivery the next day and the next week.
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What does Forward Curve mean?:
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- The pattern of prices starting from the next month.
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What does Front Month mean?:
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- Gas or electricity for delivery in the first upcoming month.
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What does Near Curve mean?:
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- The pattern of prices from the next month to the start of the next season.
What does Far Curve mean?:
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- The pattern of prices starting from the beginning of the next season.
What does Front Season mean?:
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- Gas or electricity for delivery in the first upcoming season.
What does BOM mean?:
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- Balance of Month – gas or electricity for delivery for the rest of the current month.
What does Bullish Sentiment mean?:
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- When market conditions suggest prices are likely to go up.
What does Bearish Sentiment mean?:
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- When market conditions suggest prices are likely to go down.
What does Rangebound mean?:
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- When market conditions are stable and prices are not changing much.
What does Market Fundamentals mean?:
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- Market fundamentals relates to the main factors affecting prices, such as how much people need (demand), and if there are any problems with meeting that need (supply). WE have written a specific article on this subject, which you can find here.
What does Volatility mean?:
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- How much prices are changing in the market.
What does Value-at-Risk (VAR) mean?:
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- The maximum expected loss over a certain time with a certain chance of it happening.
What does Mark-to-Market mean?:
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- Calculating the value of something based on its current price.
What do Baseload / Peakload mean?
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- What does Baseload mean?: Delivering the same amount of electricity all day, every day.
- What does Peak mean?: Delivering the same amount of electricity during busy times on weekdays.
What does NBP mean?:
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- National Balancing Point – A notional point used to measure and trade gas in the UK.
If you have come across some jargon that you do not understand and it isn’t covered above, do send an email to connect@mindfulenergy.co.uk and we can help you understand what it means, and also add it to the above list.