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• Analysing the hourly day-ahead prices
• on APX, EEX TSO

• Margaret Armstrong Sarra Mrabet

Presented at ETE Workshop Leuven, 15-16 Sept 2005
CERNA, Centre déconomie industrielle Ecole
Nationale Supérieure des Mines de Paris - 60, Bld
St Michel - 75272 Paris cedex 06 - France
Téléphone 01 4051 9313 Email
margaret.armstrong_at_ensmp.fr
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Acknowledgement

• This work was done for the Electricity Consortium
  research project with the support of

• CapGemini,
• Electrabel,
• EDF,
• Gaz de France - Gaselys,
• Poweo,
• Powernext,
• RTE

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• Objectives of Electricity Consortium

• Understanding how European markets work
• Identifying explicative factors for prices
• Modelling day-ahead prices futures
• Backtesting our models
• Evaluating energy derivatives such as futures
  options.

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• Overview of presentation

• Comparing baseload prices volumes
• on APX EEX then hourly ones
• Analysing cross-border capacity auctions TSO
• Comparing price difference (APX EEX) with TSO
  price

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• APX

• EEX

• Created in 2000

• Created in 1999

• Day-ahead market forwards

• Day-ahead market

• Publishes
• Prices
• Volumes
• Index

• Publishes
• Prices
• Volumes

• www.eex.de

• www.apx.nl

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• Comparing the baseload volumes

EEX
APX
1 Jan 2002
30 June 2005
EEX volumes increasing more rapidly than APX
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• Zoom in on baseload volumes

Dutch govt ends subsidy of 20/MWh for renewable
energy
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• EEX volumes at 4H (blue) 12H (red)

EEX volume at 12H gt volume at 4H
1 Jan 2002
30 June 2005
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• APX volumes at 4H (blue) at 12H (red)

APX volume at 12H lt volume at 4H
1 Jan 2002
30 June 2005
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• EEX volumes during day

In 2004 EEX volumes higher during peak hours
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• APX volumes during day

APX volumes higher during offpeak periods
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• Summarising volumes on APX EEX

• Removal of 20 subsidy in Jan 2003 had impact
  on
• volumes in both APX EEX

• Volumes on APX EEX are increasing but
• EEX is increasing much more rapidly than APX

• Higher volumes transacted in peak hours on EEX
• but for APX it is the reverse

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• Comparing the baseload prices

APX
EEX
30 June 2005
1 Jan 2002
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• Baseload prices

But in 2004 APX price seems to be closer to
EEX price
Are prices starting to converge?
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• Baseload prices converging

5 95 quantiles
Difference (APX EEX) decreased in 2004 again
in 2005
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• Price difference APX - EEX

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• Price difference APX - EEX

Difference (APX EEX) is positive only during
peak hours
Transmisssion costs from Germany to Holland?
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• Overview of presentation

• Comparing hourly prices volumes
• on APX EEX
• Analysing cross-border capacity auctions TSO
• Comparing price difference (APX EEX) with TSO
  price

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• Cross-border transmissions (TSO)

• 3 types of capacity auctions
• annual, monthly day-ahead

• Available on www.tso-auction.org
• Prices
• Volumes

• Possible to return  unused  capacity

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• TSO-Auction

• Interconnections
• RWE (Allemange)
• EON (Allemagne)
• Elia (Belgique)

Germany to the Netherlands Netherlands to
Germany

• For each auction
• Available capacity
• Capacity obtained
• Price MWh

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• TSO-Auction day-ahead in 2002

Unused capacity
Germany to Tennet (Netherlands) at 12h in 2002
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• TSO-Auction day-ahead in 2004

Germany to Tennet (Netherlands) at 12h in 2004
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• TSO-Auction day-ahead, monthly annual

Capacity obtained
Prices
Sum of capacity obtained at 3 auctions gtgt real
capacity
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• TSO-Auction day-ahead

• Capacity via RWE gt capacity via EON
• Nowadays less unused capacity (pink)
• Available capacity varies because unused
  capacity from monthly annual auctions can be
  returned
• Although much information is available, more is
  needed to know whether interconnections are
  congested

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• Overview of presentation

• Comparing hourly prices volumes
• on APX EEX
• Analysing cross-border capacity auctions TSO
• Comparing price difference (APX EEX) with TSO
  price

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• Comparing APX, EEX TSO prices

Averages over 24hrs per day 365 days

• Profit of about 2 /MWh in 2002
• 9 /MWh in 2003
• but nothing on average in 2004

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• Summarising results

• In 2004, there was a big drop in
• price difference APX EEX
• reduction in transmission costs

• What factors are driving TSO prices?

Which day-ahead prices are TSO prices correlated
with? APX, EEX or APX EEX ?
Are TSO prices correlated with volumes offered?
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• What's driving TSO prices?

Correlation between capacity price day-ahead
prices
Time of day
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• What's driving TSO prices?

Log Price RweT
Correlation -0.77
Log Capacity available RweT
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• Timing of peaks in prices

APX
EEX
EONT
RWET
2002
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• Timing of peaks in prices

Zoom in on price peak in July 2002
APX
EONT
RWET
Traders were slow to react
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• Timing of peaks in prices

Zoom in on price peak in November 2004
APX
EONT
RWET
Faster reactions now
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• Conclusions

• During peak hours 2004
• APX EEX is positive
• TSO prices are similar to this difference

• TSO prices are correlated
• with APX price (APX EEX)
• but much less with EEX

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• Conclusions

Log TSO prices are negatively correlated with log
available capacity. But why?
TSO prices rise when there is demand for
capacity. In that case, those who bought
capacity in earlier auctions, hold on to it it
is not returned unused So the capacity
available is smaller
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• Conclusions

During off peak periods APX EEX virtually
zero TSO prices are low but strangely volumes
are high
Looking at timing of price peaks, nowadays
traders react much faster to opportunities
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• Any questions?

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• TSO-Auction day-ahead

Pourquoi acheter de la capacité des Pays Bas vers
lAllemagne?
Tennet (Pays Bas) vers lAllemagne à 4h en 2002
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• Contexte et objectifs

• Moyens scientifiques
• 2 seniors à temps partiel (MA AG)
• 1 thésard (N Rouveyrollis) 3 ans
• 1 post-doc (O Dia) 1 ans
• 2 stagiaires (S Mrabet W Mneja) été 2004
• 1 ingenieur (T Cuingnet) été 2005