By Green Tiger Markets
Green Tiger Markets (GTM) launched the Philippines’ first exchange-based forward electricity market in 2023. Our initial premise surrounded offering financially settled Contracts for Difference (CFDs) on our own marketplace. The concept enabled generators and distributors of electricity to hedge against price volatility in the Wholesale Electricity Spot Market (WESM).
The Bigger Picture
The Green Tiger Marketplace offers a way to stabilize electricity prices across the energy supply chain. Predictable electricity cost has the dual benefit of advancing long-term infrastructure investments and also reducing consumer bill shock.
Since then, we became the first electricity market to offer custom hedging contracts for intraday periods, separating the day into Morning, Midday and Evening segments.
How Green Tiger Markets’ Forward Contracts Work
GTM provides a financially settled CFD market, meaning:
No physical delivery of electricity needs to occur. Market participants settle cash differences between the contract price and the WESM spot price all on the Green Tiger Marketplace.
Here’s how:
A commercial party, which may be a generator or another qualified market participant, agrees to sell electricity at ₱5.00/kWh via a CFD contract.
If the final WESM spot price averages ₱4.50/kWh during the pricing term, the buyer pays the seller the ₱0.50/kWh difference.
If the WESM price averages ₱5.50/kWh, the seller pays the buyer the ₱0.50/kWh difference.
This GTM structure stabilizes cash flows for both parties without changing their physical power profile.
Who Benefits from GTM’s Forward Market?
Power Generators
Power Generators are able to lock in predictable revenue streams instead of being fully exposed to volatile WESM prices. It’s incredibly valuable. Particularly useful for renewable energy developers, buying blocks in three different day cycles eliminates concerns around problematic fluctuating generation output and uncertain revenues.
Large Consumers (Industrial & Commercial Users)
For industrial and commercial electricity users, one of the biggest benefits of GTM is placing a hedge against unexpected electricity cost spikes in WESM. Hedging achieves budget certainty in energy expenses, and it’s crucial for manufacturing, retail, and other energy-intensive sectors.
Retail Electricity Suppliers (RES) & Distribution Utilities
RES and Distribution Utilities can now manage exposure to variable procurement costs. GTM also offers much more stable pricing plans to end consumers, helping eliminate Price Shock and customer frustration.
Why Is This Important for the Philippines, specifically?
1. GTM hedging reduces volatility in the Philippines electricity market
As we’ve all seen, it’s the nature of spot markets to be highly volatile. The WESM is no exception. Causes for those big price fluctuations include extreme weather, spiking fuel costs, unavoidable grid constraints, and the often unpredictable supply-demand imbalances. GTM’s CFDs provide stability by allowing price hedging months or even years in advance.
2. Supports renewable energy growth
Renewable Energy is one of the fastest growing categories in the Philippines. Renewable energy projects (solar, wind, hydro) all depend on stable revenue to secure financing. GTM’s market solidifies renewable generators’ opportunity to lock into future cash flows. Ultimately, that stability encourages investment in Philippine clean energy.
3. Complements existing contract structures
The current Philippine electricity market relies on long-term bilateral contracts and WESM spot transactions. GTM’s medium-term hedging fills a critical gap, giving more pricing certainty for baseload as well as at three different daily time blocks.
4. Encourages market transparency and liquidity
GTM’s hedging products give market-driven price discovery for the Philippines. Every trade increases overall market liquidity on our platform for forward electricity trading.
How does the Philippine energy market compare to other electricity markets?
The United States and Europe all futures and or forward markets for hedging. Trading happens Over-The-Counter (OTC) or on exchanges like the CME, ICE, EEX, and Nord Pool.
Australia’s active forward market is called ASX Energy where Australians are hedging exposure to the National Electricity Market (NEM).
India and Japan are developing forward markets, but rely more on long-term PPAs (Power Purchasing Agreements).
Before GTM, in the Philippines hedging was limited to bilateral contracts with no exchange-based forward market. That was then. Now, with GTM’s CFD market, the Philippines is catching up to international best practices. As mentioned, it means we can invest in our own infrastructure because of improved risk management and energy price stability.
Let us give you more details on how businesses can participate in GTM’s marketplace.
This article was originally published on GreenTigerMarkets.com.
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