Transcript Reservoir Content

NORD POOL
Market Integration:
Nordic Countries
APEx 2003 Conference, Catagena de Indias –
Colombia, October 14 & 15 -2003
Torger Lien, President & CEO Nord Pool ASA
Regional challenges
4
4
4
4
5
5
Countries
Governments with changing policy
Legislations
Regulators and FSA’s
TSO’s
Grid’s with reasonably good connections
AND ONE MARKET
Copyright  Nord Pool ASA 2002
1. Brief info about the Nord Pool Group
Development of the Exchange Area for Elspot
1996
Norway, Sweden
1993
Norway
15 June 1998
Norway, Sweden,
Finland
1 October 2000
Norway, Sweden
Finland and Denmark
1 July 1999
Norway, Sweden
Finland, West Denmark
Now all the Nordic
countries are part of
Elspot and hourly border
trade towards the
continent works more
efficient than before!
Copyright  Nord Pool ASA 2002
Nord Pool’s Participants
February 2003 (Legal Entities)
Finland
39
Norway
157
UK
10
Sweden
80
Denmark
22
Germany
4
USA
2
The Netherlands
3
Belgium
France 1
Switzerland
1
1
Copyright  Nord Pool ASA 2002
Total: 321
Italy
1
Elspot turnover per month 1998-2003
Yearly volumes:
1998: 56,7 TWh
1999: 75,2 TWh
2000: 96,2 TWh
2001: 111,2 TWh
2002: 123,6 TWh
Jan-Sep 03: 85,8 TWh
(Jan-Sep 02: 85,4 TWh)
Note: In addition trading volumes in the Elbas Market has since the start
in March 1999 been between 0,5 and 0,8 TWh/year.
Copyright  Nord Pool ASA 2002
500
450
400
350
0
jan-93
mar-93
maj-93
jul-93
sep-93
nov-93
jan-94
mar-94
maj-94
jul-94
sep-94
nov-94
jan-95
mar-95
maj-95
jul-95
sep-95
nov-95
jan-96
mar-96
maj-96
jul-96
sep-96
nov-96
jan-97
mar-97
maj-97
jul-97
sep-97
nov-97
jan-98
mar-98
maj-98
jul-98
sep-98
nov-98
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mar-99
maj-99
jul-99
sep-99
nov-99
jan-00
mar-00
maj-00
jul-00
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maj-01
jul-01
sep-01
nov-01
jan-02
mar-02
maj-02
jul-02
sep-02
nov-02
jan-03
mar-03
maj-03
jul-03
sep-03
Elspot System price 1993 - Sep 2003 in NOK/MWh per month
(1 EUR currently approx. equal to 8,10 NOK)
550
Average System Price
93: 80,27
94: 182,67
95: 117,67
96: 253,63
97: 135,00
98: 116,35
99: 112,11
00: 103,33
01: 186,49
02: 201,03
Jan-Sep 03: 293,98
300
250
200
150
100
50
System Operators’ (TSOs) vs. the Nord Pool Group’s
roles in the Nordic Power Market
System
Operator
(TSO)
Within the hour
The Nordic Power Exchange - Nord Pool
Trading and Clearing – physical and financial
The next day
Next day up to four years ahead
Regulating service
The Spot Market
The Financial Market
•Balancing between production
and consumption real-time
•Balance settlement of BRCs
afterwards on measured
and reported values
Physical delivery
Planned balance
Hourly contracts
Elspot (and Elbas)
Run by Nord Pool Spot AS
Price hedging (for physical Spot)
Risk Management
Financial contracts
Elspot prices underlying products
Daily--yearly contracts, Options
Run by Nord Pool ASA
Clearing services run by Nord Pool Clearing ASA
Copyright  Nord Pool ASA 2002
2. Main principles in Elspot
What is Elspot?
 Nordic Market place for purchases/sales of electric power
- gives overall planned balance day-ahead
 Short-term physical contracts
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

Duration of one hour
12-36 hours ahead (next day’s 24 hrs.)
Trading 365 days a year
Three bid types: hourly, blocks, and flexible hourly bids
 Bidding with portfolios in purchase/sales curves
 Auction trading (once per day)
 Price set at equilibrium point (buy=sell) each hour
 Handling of bottlenecks between Elspot Areas using the
so called Price Area Model (Market Splitting)
Copyright  Nord Pool ASA 2002
Demand
Supply
Bidding Areas in the Elspot
Market
Balance requirement :
Participants must achieve balance
between energy supply and energy
demand within each bidding area
(including contracts) towards TSO
NO2
FI
E
NO1
SE
Participants must be approved as Balance
Responsible Company by the national
TSO in the area(s) they intend to trade in.
(In some countries this can be handled via a
third-party agreement with a BRC).
DK1
DK2
Note: In Norway the number of Areas vary
over time and currently there are four areas
Participants place bids in Areas where
they are approved (”BRC”) and have
production, consumption or contracts
3. Handling of congestion in Elspot
Price calculation - no bottlenecks
Elspot Areas
1. Calculation of system price
2. Checking
transmission limits
Price
Purchase
NO2
Sale
Ps
E
NO1
SE
DK1
FI
One price
Trade
MW
DK2
Area prices = System Price
Price calculation - with bottlenecks
2. Checking
transmission limits
Elspot Areas
1. System price calculation
NO2
E
NO1
SE
Purchase
Sell
Flow at System Price above
capacity, thus different prices
Ps
FI
DK1 DK2
Physical power flow
3. Calculation of different
Elspot area prices
(iterative process)
Copyright  Nord Pool ASA 2002
Calculation of area prices when bottlenecks occur
Example:
System Price calculation results in a flow from Sweden to Norway above capacity (C).
System Price
D
S
Price Area Sweden
D Swe +exp
S Swe
Price Area Norway
S Nor +imp
D Nor
Norway price
System Price
Sweden price
C
C
 Solution like above: Flow is ”geared down” to max. transmission capacity (C)
by the price-mechanism. Export (Swe) and import (Nor) will be equal to
available capacity (C).
 Result: Norway price > System price > Sweden price
Participants are always credited/debited according to the Area Prices.
Copyright  Nord Pool ASA 2002
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27 4
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Elspot prices
NOK/MWh
750
for Oslo, Stockholm and System 1996 - 2003
700
Oslo
650
Stockholm
600
System
550
500
450
400
350
300
250
200
150
100
50
0
Copyright  Nord Pool ASA 2002
Elspot - share of time (in %) with common price in the whole Exchange Area
(System Price = all Area Prices)
65,0%
Year No. of hrs
%
1997
5201
59,4
1998
3825
43,7
1999
3788
43,2
2000
1703
19,4
40,0%
2001
4487
51,2
35,0%
2002
3076
35,1
60,0%
55,0%
50,0%
45,0%
30,0%
25,0%
20,0%
15,0%
10,0%
5,0%
0,0%
1997
1998
1999
Copyright  Nord Pool ASA 2002
2000
2001
2002
4. Possibilities and limits for usage in other countries and regions
Elspot’s Price Area Model - ”Market Splitting”
 Allocates transmission capacity based on the energy bids,
thus Elspot is a simultaneous energy and capacity auction
 Results in energy flows according to price signals
(flow from low  high price)
 Opens up national and international trading for all types of companies
 Bilateral contracts between parties in different countries can easily be
agreed upon and then reflected in Elspot bids (buy/sell) per bidding area
 Reduces market power because the model connects areas/countries and
importantly it is done in a non-discriminatory fashion
Copyright  Nord Pool ASA 2002
Various ways of handling cross-border
Power trading and congestion
Integrated market
Nord Pool Model
(Market splitting)
Daily auctions
Long-term auctions
Bilateral agreements
Isolated markets
Copyright  Nord Pool ASA 2002
Electricity Exchanges in Europe
Facts related to Nord Pool Group:
Nord Pool
UKPX,
APX
APX
Gielda Energii
EEX
Powernext
EX Alpen Adria
Borzen
OMEL
”GME”
Copyright  Nord Pool ASA 2002
•NP is shareholder in EEX (>17%)
•NP delivered spot auction system
(SAPRI) to EEX and Powernext
•EEX has established a financial
market (Futures), which like NP
uses their spot auction price as
underlying reference
EEX Phelix price
EEX and Nord Pool Spot Markets
Daily Average Prices in Years 2002-03 (EURO/MWh)
NPS - System Price
EURO/MWh
120,00
Prices 1 Jan - 31 Aug 2003 (annual 2002)
EEX Phelix average: € 28,89 (22,55)
NPS System average: € 38,20 (26,91)
Daily averages high/low:
EEX high: € 163,46 Jan 7 (61,00 Jan 8)
NPS high: € 114,61 Jan 6 (93,43 Dec 9)
EEX low: € 3,12 May 1 (3,47 Dec 24)
NPS low: € 15,76 June 8 (10,90 Jun 23)
110,00
100,00
90,00
80,00
Turnover 1 Jan - 31 Aug 2003 (ann. 2002)
Elspot Auction NPS: 77,9 TWh (123,6)
Spot Auction EEX: 30,0 TWh
(25,0)
70,00
60,00
50,00
40,00
30,00
20,00
10,00
Copyright  Nord Pool ASA 2002
12.08.2003
22.07.2003
01.07.2003
10.06.2003
20.05.2003
29.04.2003
08.04.2003
18.03.2003
25.02.2003
04.02.2003
14.01.2003
24.12.2002
03.12.2002
12.11.2002
22.10.2002
01.10.2002
10.09.2002
20.08.2002
30.07.2002
09.07.2002
18.06.2002
28.05.2002
07.05.2002
16.04.2002
26.03.2002
05.03.2002
12.02.2002
22.01.2002
01.01.2002
0,00
European integration ?
 Market areas to be connected
 Real competition on supply and demand
 Harmonised legislation and regulatory framework
 Equal knowledge to price sensitive information
 Harmonisation between regulators and / or common
regulator
 Sincere political willingness to implement a common
market
Copyright  Nord Pool ASA 2002
For further information, please visit:
www.nordpool.com