Belgian French market and beyond. 7th Cambridge – MIT electricity policy
conference. London, 28 September 2007. Bert den Ouden, CEO, APX. Group.
Market integration: the DutchBelgian French market and beyond 7th Cambridge – MIT electricity policy conference London, 28 September 2007 Bert den Ouden, CEO, APX Group
[email protected]
Agenda
Introduction APX Market Coupling NL-B-Fr CWE market coupling NL-B-Fr-D-Lux Inter-regional matters: CWE-Nordic coupling and BritNed
Page 2
APX Group:gas and electricity exchanges
APX Gas NL (TTF) APX Power NL APX Gas UK (NBP) APX Power UK APX ZEE (Zeebrugge HUB) Market Coupling together with other exchanges
NBP APX UK
TTF APX ZEE Belpex
Page 3
Corporate overview Operations: 5 markets on line service activities – Operations (Belpex) – Market coupling (TSO’s) – Carbon clearing
206 gross memberships
Traded (2006):
178 TWh of energy € 5.3 billion of contracts 10% of UK gas demand 18% of NL power demand
Corporate: Anglo-Dutch management Positive financial results Shareholders TenneT (74.5%, Transmission System Operator NL) and Gasunie (25.5%, Gas infrastructure company NL) Page 4
APX Group volumes: Yearly Average GWh/day 1999 to 2007 (July) APX Power NL
APX Power UK
APX Gas UK
APX Gas ZEE & NL
600 500
EnMO UKPX Acquisition Acquisition (July 2003) (July 2004)
GWh
400
0.68
2
408
401
0.93
300 339 200
287
19 33
20 37
24 44
27 53
27 52
2003
2004
2005
2006
July 2007
4
80 13
13 23
12 39
1999
2000
2001
2002
94
Page 5
264
136
100 0
254
Development of APX Group Members per Market 1999 to 2007 (July) APX Power NL
APX Power UK
APX Gas UK
APX Gas ZEE
APX Gas NL
250
Members
200
EnMO Acquisition (July 2003)
UKPX Acquisition (July 2004)
19 9 15 8
150
72 67
100 46
52
54
54
58 51
36
41
27
36
36
36
38
40
41
48
51
21
31
1999
2000
2001
2002
2003
2004
2005
2006
2007
39 27
0
57
34
50
Page 6
20 11
Types of electricity markets
Mandatory
Nodal pricing
Most of USA/Canada; South America Australia, New Zealand, Russia
Area pricing
UK before 2000, Spain, parts of USA/Canada
Electricity markets
Voluntary
No Im/export coordination
Area pricing Im/export coordination
Page 7
UK today, Most parts of Europe 2000-today Scandinavia 1995, NetherlandsBelgiumFrance 2006 NW-Europe 2009
Day-ahead spot market, area-based Price Stacked Demand bids
Stacked Supply offers
Market price Stacked supply offers
Stacked Demand bids total market volume
Page 8
Market volume = outcome of market physical suppliers and financial parties Voluntary market Some % of demand daily traded and priced Long term contracts can be physical or financial
Quantity
Hourly day-ahead scheme + blocks
Demand Blocks example
2,500.0
MWh
Eur
2,000.0 1,500.0 1,000.0 500.0 0.0 1
Supply Blocks example Page 9
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
Daily schedule Traders
Bilateral contracts Exchange: day-ahead market Price
Grid company check Quantity Prepare Page 10
11:00 Trading
12:00 E-program
16:00 OK E-program
00:00: Delivery + balancing market
European electricity market Achievements Free customers Transmission System (grid) operators Efficiency of utilities Role of regulators Shortfalls Volatile prices Low liquidity Transparency issues Inefficient use of transportation High level of market concentration Market power issues
Fragmented market Page 11
?
Market Coupling removes fragmentation Infrastructure Build more capacity…. and/or Make better use of existing capacity! Market Coupling Initiatives Scandinavia (Nordic Europe): from 1992 New region: – Netherlands – Belgium – France Transport limitation Integrated market Page 12
Explicit auctions Market Coupling Explicit daily auctions: Risks of 2-step trading of capacity / energy
1. 2
1. 2
≠
2
1.
No guarantee use it or lose it Im/exports not always in right direction (lowhigh price) Different to transfer power across successive borders Not all market participants participate in cross-border Area prices separate, even when there is no constraint
Page 13
Integrate by market coupling
Nominated flow as % of available capacity
Incomplete
80%
Adverse flow
60%
42% of all hours
40%
use of im/export capacity, with remaining price differences
20%
Price difference APX-Powernext
0% -50
-40
-30
-20
-10
0
-20%
NL to F
Net transit nominationa as a percentage of available capacity
F to NL
100%
10
20
30
40
Hourly price difference: APX Powernext (EUR/MWh)
-40%
Hourly utilization of transit capacity between Netherlands and France, 2005 Source: Frontier Economics Page 14
50
Marktkoppeling (2) (1) Geisoleerde markten gereduceerd im/exporten markt met 1 prijs (3) Prijsverschil Bij voldoende capaciteit: 1door geharmoniseerde
Spotmarkt B
Spotmarkt A
Prijs
Prijs
exports imports
Volume Page 15
Volume
Advantages of Market Coupling Removes unnecessary risks of trading short-term transmission capacity and energy separately Guarantees the optimal utilization of transmission capacity Less prone to market abuse since capacity cannot be hoarded All market participants benefit from cross-border capacity Encourages liquid, robust spot markets
Page 16
Optimal use of capacity (particularly when prices are close)
Single market (when there is sufficient capacity)
Market Coupling solution Netherlands-Belgium-France Before: separate operation of: – –
Cross-border auctions/allocations Spot markets
Sub-optimal use of cross-border capacity Incomplete, sometimes inadequate After One integrated system, 1-step operation Spot markets and cross-border flows in one Generating spot market prices 3 exchanges working together Political will Start: 22 November 2006
1. 2.
APX
Bel pex Elia
Power next RTE Page 17
TenneT
Decentralized market coupling Mechanism
Hourly “NEC” curves (Net Export/import Curve)
Start: exchange price without im/exports
Area Prices
price of area
area
Price influence (down or up) on potential im/exports
price of
X
price of
Y
area
Y
Each exchange produces NEC curves, based on bids in its area
Isolated price X
Isolated price Y
Can be done with different exchanges and systems
Exports Page 18
0
Imports
Decentralized market coupling: unconstrained/constrained
Area Prices
Available Available transmission transmission capacity capacity
Unconstrained case: Enough transmission capacity
price of area
X
price of area
Y
Price for both areas identical: enough capacity to set one price at intersection of curves
Constrained case:
Area price X Area price X = Area price Y
Limited transmission capacity Prices for areas differ: set at max. im/exports; congestion revenue
Flow X->Y Page 19
0
Flow Y-> X
TLC technical solution TenneT
ELIA
ELIA
Available capacity NL-BE border
Bid- and offer information in standardized format
APX Bids & offers Page 20
Coordination module
RTE
Available capacity BE-FR border
* Price & volume Resolve blocks
Belpex
Powernext
Settlement & Publishing of results
*
= Iterative calculations
Market Coupling Daily Process TLC PXs harmonised Gate closure to 11:00am Average publication time results: 11.15 am (Target time 11:30am, latest possible publication 11:45am) Available Transmission Capacities published
Result Local data Intermediary publication sent by each results sent to local Exchange Exchanges Intermediary PXs Results OK GATE CLOSURE
10:00
11:00
11:05(*)
11:11(*)
11:13 (*) 11:15 (**)
Central Local Order book TSO iterative approval PXs closure and local calculations process calculations calculations Page 21
Deadline result publication
11:45
Import and export: co-operation between exchanges and grid companies
P1
Grid company A
Grid company B
export
import
Exchange A price PA
Exchange B Price PB
P2
P7 P3
Page 22
P8
P4
P5
P6
Price convergence Price (Euros/MWh) 120
market coupling
Daily average prices for TLC countries
Powernext Belpex APX
100
80
60
40
20
0 Nov Page 23
Dec
Jan
Date
Feb
Mar
Apr
Price evolution Price (Euros/MWh)
market coupling Daily average prices for TLC countries
Powernext Belpex APX
Page 24
Achievements of market coupling: integration of price areas Old situation
Either prices will converge 100%, or prices diverge – but then the transmission capacity used for 100%
2% 100% of time
Better price index
19%
Better efficiency and better economic results Better basis for longterm contracts & investments
6% Page 25
73%: “Copper plate”
Shown are the data for January 2007 Percentages vary each month
Achievements of market coupling: Price difference Netherlands-France Hourly price difference, €/MWh
9% ∆P > 10 €
40% ∆P > 10 €
19% ∆P 1..10€ 4% ∆P < 1 € ∆P >10 € ∆P 1-10 € ∆P 10 € ∆P 1-10 € ∆P
