Transcript Slide 1

Lithuanian power market after
June 18th, 2012
Lietuvos energija, AB
Riga, 2012
Agenda
1. Changes in Baltic energy market after the opening of NPS Lithuanian bidding
area on June 18th, 2012
2. Practical example of Lithuanian market isolation
3. Possible suggestions for solving mentioned problems
1. Changes in Baltic energy market after the opening of NPS Lithuanian bidding area
After the introduction of NPS Lithuanian bidding area
capacity netting mechanism has been applied on
EE/LV interconnection (both directions between EE
and ELE), unfortunately EE/LV cross-border capacity
still remains to be one of the major limiting factors for
efficient electricity exchange in the Baltic region.
FI
Limited EE/LV
capacities
EE
37,43
SE3
No coupling No liquidity
Risk for
market
participants
ELE
44,08
Price coupling of ELE and LT bidding areas has not
been introduced, hence electricity volumes traded in
these areas have to be shared between them. That
decreases liquidity of both ELE and LT bidding areas
and increases the unpredictability of electricity prices
in those areas.
Prices in ELE and LT bidding areas are formed not by
the fundamental situation in the market, but by certain
trading strategies of market participants.
LT
48,34
Prices depend
on the trading
strategies
Isolation from other NPS bidding areas as well as lack
of competitive local generation consequently increase
the probability of high prices in LT bidding area.
*Data from June 18, 2012 till September 18, 2012
Lithuania works as an isolated area which implicitly is not connected with any other bidding area in Nord Pool Spot
market, therefore further developments are necessary for properly functioning common Baltic electricity market.
2. Practical example of Lithuanian market isolation
€/MWh
140.00
MW
700.0
20th of August – average price in LT was 123 EUR/MWh
Illiquidity of
ELE and LT
bidding areas
120.00
100.00
80.00
650.0
Limited capacity
on EE/LV border
600.0
550.0
500.0
60.00
450.0
Implicit Capacity EE/LV
LIMITING FACTORS – SHORT TERM
EE
ELE
Sep-16
Sep-13
Sep-10
Sep-07
Sep-04
Sep-01
Aug-29
Aug-26
Aug-23
Aug-20
Aug-17
Aug-14
Aug-11
Aug-08
Aug-05
Aug-02
Jul-30
Jul-27
Jul-24
Jul-21
Jul-18
Jul-15
Jul-12
Jul-09
Jul-06
Jul-03
300.0
Jun-30
0.00
Jun-27
350.0
Jun-24
20.00
Jun-21
400.0
Jun-18
40.00
LT
LIMITING FACTORS – MEDIUM TERM
LIMITING FACTORS – LONG TERM
1. Limited EE/LV implicit
capacities – only 270 MW.
1. Delayed implementation of
Latvian NPS bidding area.
1. Lack of competitive
generation in Lithuania.
2. Reduced amounts of
electricity imports due to
line outage in Russia
2. Lithuanian and Estonian
bidding areas are not
coupled.
2. Insufficient development of
physical EE/LV transmission
capacities.
Integration of isolated Lithuanian market into common Baltic energy market
shall benefit both producers and consumers.
3. Possible suggestions for solving mentioned problems
Suggestions:
a) NPS introduction in Latvia should be seen as a
priority, although coupling of ELE and LT bidding
areas could be used as an interim solution.
Development of
common Baltic
electricity market
b) Cross border capacities on EE/LV border should be
increased (for example, by changing capacity
allocation mechanism for electricity transit from
third countries, or by amending TRM calculation
mechanism).
EE
NPS LV
Open questions:
a) What is the timeline and key milestones for
opening of Latvian NPS bidding area?
b) Is price coupling of ELE and LT areas feasible in
order to temporarily increase liquidity in the spot
market?
c) How is congestion income from EE/LV bottleneck
used for the development of infrastructure?
LT