Transcript Market Coupling: Status of the European electricity market

The European Electricity Market
Integration and some Thoughts on
Gas Markets
Market Coupling and Ways Forward
Lene Sonne
Vice President, Market
Agenda
The Vision
Status of market coupling projects
Possible ways forward
EMCC: an overarching mechanism: First of its kind
Integrating gas markets
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Vision for European Electricity Markets
Single European Market: Transparent and Liquid Market,
Free trade across all National Borders
Socio-Economics
Effective utilization of the existing
power system
-
Merit order activation of
generators despite
geographical location
Basic Requirements:
Energy bid/offer information
and cross border capacity
Implicit auctions:
-
most efficient allocation
method
-
should be applied at all
congestion points
PEX-TSO coordination
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Status of existing Regional Markets
Regions/Markets
Current Status
Nordic
Operational
Spain-Portugal
Operational
FR-BE_NE
operational
Nordic- Germany
(EMCC)
Planned Q2 2008
FR-BE-NE-DE(CWE)
Planned Q1 2009
Center Eastern Europe
Operational
Spectrum
Intraregional price
setting
Intraregional price
setting
Intraregional price
setting
Inter-regional flow
setting
Intraregional price
setting
Intraregional
Type of Market
Coupling
Market splitting
Market splitting
Market coupling
Market coupling
Market coupling
Coordinated explicit
auctions
The first Inter-regional
Coupling
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EMCC and Tasks
EMCC - European Market Coupling Company ,
private limited company (GmbH)

Set the correct flows

TSO and PEXs equal Shareholders

Collect congestion revenue

EMCC is located in Hamburg

Publish and maintain
information ETC…


Calculate local
market prices

Settlement ETC..
EMCC
Central coordination Entity
EEX
Nord Pool
Spot
Germany
FI,DK,SE,NO
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Possible ways Forward
Several regional/local solutions
Extremely important to coordinate these solutions
How:
1. Selecting compatible regions for further integration
2. An overarching mechanism to coordinate regions
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Selecting Compatible Regions for
Further Integration
Condition:
- Efficient exchange on both sides of the congestion point
Analyze Potential benefit compared to challenges of
integration:
Potential benefits:
- secure right direction of flow on interconnections
- Sufficient size of cross border capacity
Challenges of integration:
-
Number of stakeholders, difficulties of multilateral agreements
-
Necessary market harmonization
A gradual process that eventually extends to a Pan-European
solution
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Overarching Mechanism to Coordinate
Regions: less need for full harmonization
Overarching Mechanims
EMCC+
MC (CWE)
MS (Nord Pool
Market Coupling
PEX 1
PEX 2
Price area
Price area
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Governance of the Market Coupling Process
Several stakeholders involved: high level of governance
challenges
Stepwise harmonization considered to be the best
option
Need for regulatory guidelines:
- Indicate best practice for market coupling
- Require commitment from all stakeholders
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Integrating gas markets
The development of the gas market has been lagging behind
compared to the electricity market.
An integrated and well functioning market for gas must be the
final goal.
- The EU Electricity & Gas markets 3rd legislative package
- A vision to make the internal gas market work.
Same development for gas and electricity?
- In principle yes, but differences must be recognised.
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Evolution of Gas and Electricity Markets
Socio-economic efficiency
Gas
Sector?
Explicit
auctions
FCFS
Implicit
auctions
Pro Rata
Before
Liberalization
Power
sector?
Gas
Sector?
Time
The evolutionary path for gas might be different from electricity
However, the final goal must be an efficient integrated European
gas market
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Steps to be taken
Transparent prices
-
Clear trend - gas exchanges are being established around Europe
Further step:
- Short-run:
- increase utilisation of capacity
use-it-or-loose-it
use-it-or-sell-it
- cooperation between TSOs to harmonize capacity products
- Medium-run: explicit capacity auctions
- Long-run: market coupling between existing gas
exchanges
An integrated market for gas is possible – but some serious
challenges must to be solved.
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