Energy Trading Glossary: Gas, Power and LNG Terms
Core energy trading terminology across gas, power and LNG.
Market structure
- Hub — a virtual or physical trading point where gas changes ownership.
- Day-ahead — the market for delivery on the following day.
- Intraday — trading for delivery within the current day.
- Balancing market — the mechanism the system operator uses to match supply and demand in real time.
- Capacity market — payments for available generation or demand response capacity.
Spreads and economics
- Spark spread — the margin between power price and gas fuel cost.
- Dark spread — the equivalent margin for coal-fired generation.
- Time spread — the value of storing energy between periods.
- Location spread — the value of moving energy between markets.
- Netback — delivered price less transport and handling costs.
LNG
- Liquefaction — cooling gas to liquid for shipping.
- Regasification — returning LNG to gaseous form at the import terminal.
- Boil-off — cargo that vaporises in transit.
- DES and FOB cargoes — delivered versus loaded pricing bases.
- Destination flexibility — the right to redirect a cargo to a higher-value market.
Risk and contracting
- Take-or-pay — the obligation to pay for contracted volume whether lifted or not.
- Tolling agreement — paying for the right to convert one commodity into another.
- Optionality — the value of flexibility in volume, timing or destination.
- Margining — collateral posted against open derivative positions.
- Guarantee of origin — a certificate evidencing renewable generation.