CME Group to launch wind power derivative contracts

CME Group, a derivative exchange platform, is set to launch financially settled wind power futures and options contracts to help investors manage risk associated with wind power generation.

Based on indices provided by Vaisala Xweather, the new futures will track and settle against independent datasets that model projected wind power output at designated locations, including Australia and the US.

The five indices are the Wind Power Germany ERA5 100m 2019 Index; Wind Power Germany ERA5 100m 2022 B Index; Wind Power UK ERA5 100m 2022 Index; Wind Power Australia VIC 2024-06 Index; and the Wind Power US Texas ERCOT ERA5 100m 2022 Index.

The regions across the four areas selected have either a significant amount of installed capacity or a notable percentage of their electricity comes from wind generation, CME Group said.

The new contracts add to CME Group's offerings on the energy transition, including Henry Hub natural gas and weather futures.

CME Group global head of energy products and managing director Peter Keavey said the offering will allow investors to manage "fluctuating" wind production.

"As wind power accounts for a growing share of electricity generation, hedging renewable energy markets has never been more important," Keavey said.

"Our new wind futures and options contracts will provide market participants with a standardised, exchange-cleared solution to manage their exposure to fluctuating wind production impacting the power stack - all on the same platform as natural gas, power and weather."

Meanwhile, Vaisala Xweather general manager of insurance sales David Whitehead added: "Our work with CME Group brings the same independent, trusted, and rigorously modelled data behind temperature contracts to wind power, giving traders, utilities, and renewable operators a standardised way to manage the financial effects of an increasingly extreme weather environment."

"It's a natural extension of the datasets our settlement services team has previously provided CME Group with, and we're excited to help scale the market for exchange-listed renewable weather derivatives across the US, Europe, and Australia."