La%20disciplina%20del%20mercato%20elettrico

1

How Italian electricity market manages network
constraints
Rome, Turin, September 2007

2
Agenda

• Market Structure
• Transmission limits

3
Market Structure

• A 24 hours Electronic Market, by which market
  players can buy or sell electric energy

IPEX

• Electronic Platform by which market players
  register commercial transactions and related
  programs of consumption or production, after the
  conclusion of private contract agreement (OTC
  agreements)

PCE
4
IPEX Market a Brief description
Society which manages Italian Electric System
Consumers who use UCVs (Unit of virtual
consumption) or Pump plants pay Zonal Price
Phase Description Assignment Price Time
MGP By Day Before Market (MGP), market players make bids and offers, proposing the Quantity to buy or to sell the Maximum price / minimum price for MWh Selling Zonal price Buying Unique National Price (UNP) Start T-9 dd End T-1 dd (9.00 am)
MA1 By Adjustment Market (MA1), market players are able to modify programs defined during MGP Selling Zonal price Buying Zonal price Start T-1 dd (10.30 am) End T-1 dd (14.00 pm)
MSD By Dispatching Services Energy Market (MSD), TERNA spa , buys or sells dispatching services See MSD Details See MSD Details

• By Ipex
• Market Players join to an implicit auction market
  to buy or sell Electric Energy
• Terna guarantees the equilibrium of Italian
  Electric System

Note T The day in which electric energy is
physically exchanged
5
IPEX Market Buying and selling price
Price
Calculation

• Zonal Price

• For each hour UNP is weighted average of
  Geographic zonal prices (weight Consumed
  quantity)
• S(Pi X Qi)
• S Qiwith
• i referring zone Q Bought Quantity P Zonal
  Price

• UNP

• If there isnt zonal congestion, there is only
  one zonal price which coincides with UNP

• UNCONSTRAINED UNP

• Unconstrained UNP is calculated intercepting
  national demand curve and national offer curve
  (hypothesis of no transmission limits)

6
IPEX Market MSD Details
By Dispatching Services Energy Market (MSD),
TERNA spa buys or sells dispatching services
Day Before MSD Real time MSD
Dispatching services To Resolve System congestions To Guarantee storage margin To Balance Italian Electric Energy System in real time
Plants Units of production admitted by TERNA Units of production admitted by TERNA
Players Dispatching service players Dispatching service players
Price Proposed Price Proposed Price
Time Start T-1 dd (14.30 pm) End T-1 dd (16.00 pm) Real Time
Real time MSD permits to resolve unexpected lack
of balance
7
PCE - Overview
Commercial Phase
Physical Phase
Acceptance / Refusing
Transaction proposal
Programming
IPEX Market
Final Result

• PCE player makes a transaction proposal, choosing
  his counterpart, the kind of transaction (selling
  or buying) the profile of transaction (Baseload
  peak) the account to use the referring period
  the bound code and the quantity

• Counterpart refuses or accepts proposal. In case
  of acceptance, Counterpart indicates the bound
  code, his referring account and quantity (which
  must be equal to offered/bid one)

• PCE Player can choose the units by which he sells
  or buys energy
• Quantity programmed could be equal or less to the
  quantity bought or sold in commercial phase

• GME generates PGM files, which resume PCE Player
  programs
• Programs are sent to IPEX automatically
• GME runs the day before market

• GME provides offers or bids results, by PGM files
  and BUS files

Description
Player

• PCE player

• PCE player

• PCE Player

• GME

• GME

Price

• The price is established by parties privately and
  it mustnt be specified in transactions

• The price is established by parties privately and
  it mustnt be specified in transactions

• The limit Price can be indicated during
  programming (only for IPEX market players)

• N/A

• Zonal price
• UNP

Time

• T-60 dd to T-2 dd with T the day in which the
  electric energy is exchanged physically

• Offer/bid day to T-2 dd with T the day in
  which the electric energy is exchanged physically

• Deadline T-1 (8,30 am) with T the day in
  which the electric energy is exchanged physically

• T-1 dd with T the day in which the electric
  energy is exchanged physically

• T-1 dd with T the day in which the electric
  energy is exchanged physically

see details on following slide
8
PCE Focus on transactions

• The maximum quantity which can be loaded on an
  account is equal to the sum of margins which
  compose the account

20 MWh
40 MWh
20 MWh
10 MWh
60 MWh
By commercial phase, market players can act as
traders
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PCE Focus on programming
Op1 Op2 Op3 Op4 Op5
Op1 -100 60 40 - -
Op2 -60 50 10
Op3 -40 0 20 20
Op4 - - -20 20 -
Op5 - -10 -20 - 30
30 MWh
All the quantity bought/sold in commercial phase
can / must be nominated on physical programs of
injection or withdrawal
10
Agenda

• Market Structure
• Transmission limits
• Transmission limits overview
• Transmission limits and IPEX Market
• Transmission limits and PCE Market

11
Geographical Zones with Transmission Constraints
Summer situation (Example)
Notes
250
AUSTRIA
SWITZERLAND
2260

• The possibility to buy/sell electric energy from
  a zone to another is bound by
• Transaction Limits fixed by TERNA
• Physical limits connected whit units capacity
  (units margin) fixed by TERNA
• Generalized limits, a composing of transaction
  limits which exist actually, could help to manage
  congestion in critical area

350
SLOVENIA
FRANCE
2400
3100?1100
2000?2200
300
3900?2000
500
GREECE
100?600
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Market splitting Mechanism
Flowscompatiblewith AvailableTransmissionCapac
ity?
Single National Price
YES
NO
Price of Importing Zone
Price of Exporting Zone
Market Splitting
Energy Flows between Zones
gt
Zonal Selling Prices
Injection/WithdrawalSchedules SatisfyingAvailabl
e Transmission Capacity
Nationwide Injection/Withdrawal Schedules
UniformPurchasingPrice
Market splitting mechanism allows to manage
Italian Electric System Congestions
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Advantages of Market splitting system
Short time efficiency

• Market chooses the best available plants, in
  respect of the existing limits, minimizing the
  costs of production and allowing an efficient use
  of Electric Italian Network
• Electric energy flows from lower price zones to
  higher price ones

• New investments are attracted by the highest
  costs of electric energy supply. Consequently
• Prices difference between different zones is
  going to be reduced
• Power difference between different zones is going
  to be reduced

Long time efficiency

• UNP is lower than unconstrained UNP if
• The Price reduction of exporting zones is higher
  than the price rising in importing zones
• The price reduction involves higher volumes than
  price rising (Italian case)
• Reduction of electric energy cost can be
  calculated as (UNP unconstrained UNP ) X Q,
  where Q is the electric energy exchanged hourly

Reduction of electric energy costs

• Implicit revenues in the spot market, revenues
  from congestion are given from the gap between
  the two zonal price (Pz import Pz export) X QF,
  where Pz Import gt Pz export and QF is the
  maximum interconnection capacity from the
  exporting zone to the importing one
• Explicit revenues in the OTC programs, revenues
  from congestion are called CCT (Corrispettivo
  Capacità di Transito) and are paid by producers
  explicitly. They are calculated as the delta
  between zonal price in which the production plant
  is situated and UNP

Revenues from congestion

• Inter-zonal congestions are resolved in MGP
  market, with a reduction of cost in Dispatching
  Service Market (where electric energy price is
  the offered one pay as bid)

Minor congestion costs
CCT are paid by consumers who uses UCV Units or
Pump Plants too see details on following slide
14
Reduction of electric energy costs An Example
14th August
14th August, 21 Hour

• UNP 78,30 / MWh
• Unconstrained UNP 92,95

/ Mw
59,91
59,91
14.090
93,66
3.442
93,66
3.634
1.598
93,66
93,66
4.990
534
93,66
93,66
HOUR
Unconstrained UNP
2.629
UNP
Price (/MWh)
Quantity (MWh)
UNP lower than Unconstrained UNP in 21 Hour is a
consequence of Market splitting between North and
the rest of Italy
Price and quantity only for zones which
determinate UNP
15
Revenues from congestion An example
14th August, 21 Hour
Revenues
SWITZERLAND
SS (PZ import-PZ export )X QF
(93,66-59,91)X2.500(59,91-42,00)X1.180
84.37521.133 105.509
42,00
1.180
59,91
E_NW
2.500
59,91
93,66
Price (/MWh)
Energy Flow
Separated Zone
Revenues amount to 105.509 for the 21 hour of
14 August
16
Transits management (2006)
() 2005 data
17
Production plants renewal
3.000
MW
8.600
2.000
- 2.100
5.700

• Inefficient Plants (high value of merit order)

Building of new plants for 8.600 MW in Italy, in
the last two years
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Italian Electric System 2007 Structure vs 2004
Italian Electric System - 2007
Italian Electric System - 2004
FRANCIA
SVIZZERA
AUSTRIA
SLOVENIA
FRANCIA
SVIZZERA
AUSTRIA
SLOVENIA
ESTERO NORD OVEST
ESTERO NORD EST
ESTERO NORD OVEST
ESTERO NORD EST
NORD
TURBIGO-RONCO
MONFALCONE
NORD
TURBIGO-RONCO
MONFALCONE
CENTRO-NORD
CORSICA
CENTRO-NORD
CENTRO-SUD
SARDEGNA
CORSICA
PIOMBINO
SUD
ESTERO CORSICA
FOGGIA
SARDEGNA
CENTRO-SUD
ROSSANO
CORSICA AC
BRINDISI
SUD
CALABRIA
ESTERO SUD
ROSSANO
BRINDISI
SICILIA
PRIOLO
GRECIA
CALABRIA
GRECIA
VIRTUAL ZONE
SICILIA
PRIOLO
PHYSICAL ZONE
19
Agenda

• Market Structure
• Transmission limits
• Transmission limits overview
• Transmission limits and IPEX Market
• Transmission limits and PCE Market

20
Unconstrained UNP vs UNP 1 Week of July, 2007
/ MWh
Unconstrained UNP
UNP
21
Unconstrained UNP vs UNP Delta 2007 vs Delta
2005 (1 Week of July)
/ MWh
Delta 2005
Delta 2007
Lower Price zones volume ltlt Higher price zones
volume
22
Agenda

• Market Structure
• Transmission limits
• Transmission limits overview
• Transmission limits and IPEX Market
• Transmission limits and PCE Market

23
CCT assumptions

• Electric Producers when act on PCE pay or
  receive CCT (Corrispettivo Capacità di Transito)
  in case of congestion
• CCT is calculate, for each hour and zone, as
• (Pz-UNP) X Qz
• With
• Q the OTC programmed quantity accepted on IPEX
  after MGP running
• z the referring zone
• Electricity moves from lows to high price zones
• If Zonal Price is minor than UNP, a producer is
  contributing to congestion and he pays CCT
• If Zonal Price is major than UNP, a producer
  isnt contributing to congestion ad he receives
  CCT

Electric consumers owners of UCV units or Pump
Plant pay/receive CCT too, when they use this
kind of units
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CCT Trend example From 11 to 20 July 2007
/ MWh
Congestion frequent in North and South of Italy
Italian zones only