Transcript Document
European electricity market:
Improvement potential in market
structure and quality
Bert Den Ouden
CEO, APX Group
EPFSF Annual conference
15 May 2007
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
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Overview of APX Group activities
Operations:
Traded (2006):
178 TWh of energy
€ 5.3 billion of contracts
10% of UK gas demand
18% of NL power demand
Development of APX Group Members
per Market, 1999 to March 2007
200
Number of Members
5 markets on line
4 service activities
206 gross memberships
Gas NL
Gas Zee
Gas UK
Power UK
Power NL
100
0
19
9
11
15
11
5
46
27
21
20
52
54
8
54
58
39
27
34
36
36
41
31
36
36
38
40
41
67
70
51
54
48
51
1999 2000 2001 2002 2003 2004 2005 2006 2007
Corporate:
www.apxgroup.com
Anglo-Dutch management
Positive financial results
Shareholders TenneT (74.5%, Transmission System Operator
NL) and Gasunie (25.5%, Gas infrastructure company NL)
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European electricity market
Achievements
Free customers
TSO tasks
Efficiency of utilities
Role of regulators
Shortfalls
Volatile prices
Low liquidity
Transparancy issues
Inefficient use of
transportation
High level of
concentration
Market power issues
Fragmented market
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?
Some available solutions
Infrastructure
Build more capacity….
and/or
Make better use of
existing capacity!
Market Coupling
Market organization
Transparency
Carbon market
regulation
Transport limitation
Integrated market
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Market Coupling
Netherlands-Belgium-France
Before
Fragmented 2-step operation
2 capacity auctions on each border
2 electricity spot markets
After
One integrated system, 1-step operation
Daily allocation of transmission
capacity between 3 countries
Generating spot market prices
3 exchanges working together
Political will
Start: 22 November 2007
TenneT
1.
2.
APX
Bel
pex Elia
Power
next RTE
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Achievements of market coupling:
utilisation of transmission
market coupling 22 Nov 06
Ut ilis a t io n % B e lg ia n - D u t c h b o rd e r
100%
90%
80%
10 - d a y mo v ing a v e ra g e
Average border utilization
Full utilisation time
70%
Upper graph:
Average utilization
as % of available
30 60% after MC
60%
50%
40%
Lower graph: timepercentage of full
usage
30%
20%
10%
0%
10 Nov
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0 25% after MC
10 Dec
9 Jan
8 Feb
Achievements of market coupling:
price convergence
market coupling 22 Nov 06
Price
(Euros/MWh)
120
Daily average prices for TLC countries
Powernext
Belpex
APX
100
80
After MC: strong
convergence(>70%
of time)
40
20
0
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Lower graph: Powernext
Before MC:
correlation, no
convergence
60
Sep-06 Oct-06
Upper graph: APX
Nov-06 Dec-06
Jan-07
Date
Feb-07 Mar-07
Some price
Apr-07
differences remain
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%
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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 <1 €
51% ∆P 1..10€
68% ∆P=0
Equal price
“copper plate”
8% ∆P < 1 €
Before Market Coupling
Winter 2006
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After Market Coupling
Winter 2007
Equal price
“copper plate”
Price convergence simulation for coupling in
“Pentalateral” region (NL-Be-Lux-Ger-Fr)
Hourly price difference, €/MWh
Results Historically
Simulated coupling
15%
35%
38%
33%
24%
19%
19%
12%
2%
14%
3%
3%
56%
52%
58%
68%
66%
∆P >10 €
∆P 1-10 €
∆P <1 €
Equal price
“copper plate”
54%
9%
Fr-Nl
* by APX
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9%
9%
Fr-Ge Nl-Ge
Fr-Nl
Fr-Ge Nl-Ge
** simple daily ATC capacities like used in the explicit auctions (not flow-based)
Conclusions market coupling
Market Coupling is proven solution, yields:
– Better use of transmission capacity
– Im/exports always in right direction
– Removal of im/export barriers
– Prices converge when there is no
constraint: “copper plate”
– More market parties, better liquidity,
reduction of market power in the bigger
area
Creation of NW-European market
European market
perspective
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European copper
plate is possible
Utilize existing
transport capacity
Integrated market
Better index,
better liquidity,
reduced market
power
Better basis for
financial market
and investments
Market transparency
Report EC competition highlights market information
Information on availability of power plants: scheduled
maintenance and (non-scheduled) unavailability
May have high impact on (spot) market price derivatives
Information held by parties having generation assets
Transparency important for new entrants, financial market parties
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Transparency regarding price
calculation on the spot markets
Publication bids/offers (anonymous): important for index used for futures
APX web site example
Supply curve
offers
Demand
curve bids
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price
Publication of power plant availability
UK, Nordic (Regulated)
Complete
Accurate
Compliance
Sanctions
Continental Europe (Voluntary)
Growth model
Accuracy issues
No strict compliance
No sanctions
Compliance is needed for
accuracy of data
Important role for regulator
Important for financial
market and investments
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Regulated
Voluntary
Carbon trading and electricity price
Strong correlation between rising prices for CO2-allowances
and rising electricity prices since the beginning of 2005*
The strong price increase in e.g. the German market during
2005 on can be explained exclusively by taking into account
the effect of CO2*
After decrease of
carbon price,
power prices
dropped too
Huge movements
in carbon prices
after publishing of
carbon data
Uncertainties
* Source: VIK-Opinion on the Preliminary Findings of the Energy Sector Inquiry (VIK, April 2006)
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Needs of the carbon market
Achievements
CO2-driven market
Recognition
Reductions
Shortfalls
National bias
Market distortions
Contribution to power
price volatility
Publication issues
Political uncertainty
Lower liquidity in longterm contracts (forwards)
Effect on investments
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Currently: carbon market not
supervised by regulators
(both financial and energy)
Needed:
Harmonization
Transparency rules
Regulation
Political stability
Role of regulators in
carbon market needed
Important for long-term
markets, investments
Summary
Huge potential for structural improvement in the power market
Better use of existing infrastructure: market coupling
European “copper plate”
Better efficiency, better economic results
Better market liquidity, better price index, reduction of market power
Transparency: compliant publication of generation availability
Better role for financial parties and new entrants
More liquid and reliable daily prices
Regulation of the carbon market
Decrease of uncertainties
Better liquidity in the forward markets
Better prices
Better efficiency
Effort in market structure /
market quality
Economic results
Investment climate
Security of supply
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A VITAL LINK IN ENERGY TRADING
[email protected]
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