Transcript vwewjanuari2001

EuroPEX
Decentralized Market Coupling as the
preferred cross-border method
B. den Ouden, President of Europex
APEx Annual Conference 2004
Leipzig, Germany, 12 October 2004
EuroPEX
Some congested borders in Europe
Reasons:
 National policies in the
past
 Fuel decisions
 Local taxation / policies
Nord Pool
New lines:
 Slow, huge investment
UKPX/APX
Fragmented market!
 Important: method of
allocation of limited
transmission capacity
Pagina 2
EEX
OTE
Powernext
Borzen
GME
OMEL
Opcom
Implicit auctioning (market coupling)
EuroPEX
Full transparency in constraint management
Area price difference

One-step
process

No difference
between auction
price and area
price difference

Price
Maximum
capacity
Spot Market
Area A
Spot Market
Area B
Δ
Stimulates
liquidity in each
area
Maximum
capacity
Pagina 3
Quantity
Quantity
Implicit auctioning (market coupling):
EuroPEX
Full area integration when no constraint
One price for both areas

Areas merge at
that moment

Trade barriers
completely gone

Liquidity shared
Price
Allocated
capacity
Pagina 4
Spot Market
Area A
Quantity
Allocated
capacity
Spot Market
Area B
Quantity
Features of Decentralized Market
Coupling
EuroPEX

Enables coupling of multiple areas together with efficient
allowance for loop flows on meshed networks

Supports block bids and other local market requirements

Supports bilateral contracts and netting of counterflows

Requires only limited harmonization of market rules, and
no change to local notification/imbalance arrangements

Provides open and fair market access with no additional
barriers beyond existing local PX requirements

Transparent, rule based, auditable methodology
Pagina 5
Decentralized market coupling
EuroPEX
Price Elasticity Curves for each area
Elasticity curves
Area
Prices
Depicting price
influence of potential
im/exports to/from
each individual area
price of
price of
area
area
X
Y
Isolated price X
Isolated price Y
Exports
0
Imports
© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl
Pagina 6
EuroPEX
Coupling the areas
Import in X = export in Y
Daily capacity ?
Area
Prices
price of
area
X
price of
area
Y
Isolated price X
Isolated price Y
Flow X->Y
0
Flow Y-> X
© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl
Pagina 7
To be supplied by
TSO’s………
Decentralized market coupling:
result when “unconstrained”
Unconstrained case
Area
Prices
Enough transmission
capacity
price of
area
X
price of
area
Y
Price for both areas
identical: enough
capacity to set price at
intersection of curves
Area price X =
Area price Y
Available
transmission
capacity
Flow X->Y
0
Flow Y-> X
© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl
Pagina 8
EuroPEX
Decentralized market coupling:
result when “constrained”
Area
Prices
Constrained case
Available
transmission
capacity
price of
area
X
price of
area
EuroPEX
Y
Area price X
Area price Y
Limited transmission
capacity
Prices for areas differ:
set at maximum
im/exports
Difference=revenue
for TSO’s
Flow X->Y
0
Flow Y-> X
© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl
Pagina 9
Origins of FMC
Europex –ETSO (European TSOs)
EuroPEX
Flow-based market coupling
ETSO-EuroPEX JWG
Flow-based modelling
Market coupling
ETSO
EuroPEX
Pagina 10
Europex working
group
member from each
exchange
EuroPEX
FMC day-ahead market
Regional price
bids/offers
Regional markets
Import/export
curves
Inter-regional
price-difference
bids/offers
Import/export &
price difference
schedules
Inter-regional
calculations
Transmission model
Pagina 11
Schedules
& prices
Settlement
EuroPEX
Forward markets

FMC is compatible with
- forward transmission rights
- financial hedging instruments
- options (UIOLI or UIOSI)

So transmission capacity auctions and/or financial
instruments can be used if required
Pagina 12
EuroPEX
Benefits of FMC
Congestion management
- Flow-based approach and netting of schedules
maximises use of inter-regional transmission network
Market efficiency
- Integrating transmission access and energy trading
eliminates unnecessary pricing risk and concentrates
liquidity
- Inherent cross-border access for all market
participants
- Variety of trading options: bilateral/exchange, blocks
Feasibility
- Builds on existing trading infrastructure and liquidity
- Can evolve over time
Pagina 13
EuroPEX
Outstanding issues

Technical development
- transmission model
- market coupling mechanism




Pagina 14
Evolutionary paths (Member State
dependent)
Regulatory and contractual matters, including
the designated status of power exchanges
Input for consideration by EU Comitology
Advice for local projects
EuroPEX
Step by step approach
Implicit auctioning between
exchanges: step by step
process

1. Local Projects

2. Regional developments

3. European integration
Manageable learning curve
Pagina 15
European Regulatory Forum
conclusions September 2004

Implicit auctioning/market
coupling: best method

European commission: mix
– Day-ahead: implicit auctions
– Longer: explicit auctions

Regional fora based on:
- Commission paper
- ETSO/Europex work

Growing consensus
Path for further development
Pagina 16
EuroPEX