APX, presentatie, Engels

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Belpex project and market couplingAPEX
ConferenceSeoul, 30 October 2006B. den Ouden,
CEO APX Group
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Agenda

• Development APX
• Belpex and Trilateral market Coupling
• Multilateral European perspective

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Building the APX Group
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Auctioned day-ahead market

• Double-sided auction system
• Hourly day-ahead contracts (MWh)
• Physical delivery
• Central counter party APX
• Equilibrium price for each hour (Euro/MWh)
• Hourly volumes/prices published

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Volumes Dutch Power Spot Market 2000-2006
Average MWh/day and of end delivery
24 22 20 18 16 14 12 10 8 6 4 2 0
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Development of intra-day market

• Regulator roadmap promoting intra-day
  cross-border market. An international intra-day
  market would be the best solution
• As APX Eurolight trading system allows fast
  implementation and members support this
• APX has started up national market, precursor to
  international
• Willingness to develop this further with
  international partners

APX Power NL Strips - Last update 0915 - 12th
October 2006
APX Power NL Intraday - Last update 1815 - 13th
October 2006
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Market transparency

• Report EC competition highlights market
  information
• Information e.g. on maintenance and outages of
  power plants, is needed, especially for
  non-incumbent players or investors.
• A good system of market information for power,
  gas, emissions is needed. APX supports and
  facilitates initiatives

Published bid curves
Availability information
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Participants per market (2002)
Participants per market (Sept 2005)
Electricity markets
Gas markets
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Product Volumes APX Group, MWh/day
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Corporate

• APX Group
• 5 markets ?
• 120 members
• Profitable
• Traded
• 150 TWh of energy/year
• 4 billion Euro/year

Service for Climex Alliance Service for Belpex
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Agenda

• Development APX
• Belpex and Trilateral market Coupling
• Multilateral European perspective

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Market Coupling integration of European power
market

• Europes ambition one
• common power market
• Not enough transmission capacity
• Price harmonization not possible
• Local markets
• Fragmented market!
• How to optimize limited
• transmission capacity?
• Market-based
• Explicit auction
• Implicit auction
• ( market coupling)
• Nordic Model
• Decentralized

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Trilateral Market Coupling APX-Belpex-Powernext

• Market coupling for daily allocated
  capacitybetween 3 countries Trilateral Market
  Coupling
• Monthly and yearly auctions remain
• Co-operation project
• Exchanges and TSOs APX / Powernext
• Services to Belpex
• Belpex exchange jointly owned
• 60 Elia, 10 TenneT-APX-RTE-Powernext
• Testing of Market Coupling system good results
• Launch Nov 2006
• Regulators decision

? TenneT
APX
Bel pex
? Elia
Power next
? RTE
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Market coupling 1. Situation with daily
explicit auction

• Disadvantages
• Additional daily risk
• Hoarding capacity
• Adverse scheduling
• Incomplete use
• Market fragmentation

Price/ Auction revenue
Explicit auction of transmission capacity
Spot market area A
Spot market area B
Demand incl exports
Price
?
Maximum im/export
Supply incl imports
Quantity
Quantity
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Market coupling 2. Replacement by daily
implicit auction

• Advantages
• Removal of daily risk
• No adverse scheduling
• All capacity 100 used

Price difference /Auction revenue
Explicit auction of transmission capacity
Spot market area A
Spot market area B
Maximum exports
Price
Maximum im/export
Maximum imports
Quantity
Quantity
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Market coupling 3. Situation without congestion

• Advantages
• Markjets merge
• No fragmentation
• European market

No congestion Equal price
Explicit auction of transmission capacity
Spot market area A
Spot market area B
Optimal exports
Price
Maximum im/export
Optimal imports
Quantity
Quantity
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The benefits of implicit auction (market coupling)

• From 2-step process 1) capacity auction
  2) spot market,
• Now 1-step process spot markets integrated
  cross-border auction
• All local players play internationally better
  liquidity, transparency
• When there are transmission constraints
• Capacity always used to the maximum, most optimal
  way
• Guaranteed 100 use it or lose it netting of
  im/exports
• When there is no real constraint
• Market coupling unifies markets / prices
• For x of time, markets merge ? part time
  copper plate
• Integrated European electricity market

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Illustration of potential unused and adversely
scheduled capacity 2005
Incomplete use of Transmission capacity
Adverse flow 42 of all hours
Hourly transit flow nominations NL?? F as of
available transit capacity, versus price
differential
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Decentralized market couplinginfluence of im-
and export on individual area prices
Area B
Area A
Price
Price
demand
export
demand
supply
supply
import
Quantity
Quantity
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Decentralized market coupling 2 countries

• Elasticity curves
• Depicting price influence of potential im/exports
  
• Each exchange produces hourly curves
• zero import price is based on area bids like
  today, price dependency curve is based on the
  same in case of additional imports and exports

Area Prices
price of area Y
Isolated price X
price of area X
0
Imports
Exports
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Situations unconstrained/constrained
Area Prices
price of area Y
0
Flow Y?X
Flow X? Y
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System development

• Current APX and Powernext systems for spot
  market
• Prototype for 2 markets
• Prototype for 3 markets (somewhat more
  complicated)
• ? Trilateral market coupling development
• Joint development of APX and Powernext central
  coupling module, local modules, iteration rules
• Calculation for each hour straightforward, no
  iterations
• Calculation with multi-hour blocks iteration
  needed
• Development for X markets underway
• Multilateral market Coupling (MLC)
• European development

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Implementing a decentralised technical approach
BELPEX
POWERNEXT Same as Belpex
APX Same as Belpex
Schedule
Bids
2
3a
3b
Portfolio allocator
Block selector
Nec creator
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Coordination Module
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TSO
Iterative and decentralized, yet Efficient
costs within limits Fast results within
minutes Right converging iterations Reliable
allocate within ATCs
Available Transmission Capacity ATC
1
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Market Coupling Daily Process

• Harmonised deadline for order submission 1100am
• Target time to publish results 1130am (latest
  1145am)

Available Transmission Capacities published
Intermediary Results sent to local Exchanges
systems
Results ready
Initial Data sent by each Exchange to the CM
Deadline for order submission
Results published
1100
1000
1110
1120
1125
1145
Consistency checks
Iterative calculations
Final calculations
Order book closure and Initial calculations
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Contractual approach
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Result TLC (Trilateral Market Coupling) region
countries become price zonesOutcome depends on
market forces, transmission constraints
Latest news On 27 October 2006, the three
regulators from the three countries approved
this. Start of trading according to this coupling
is scheduled for 21 November 2005
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Agenda

• Development APX
• Belpex and Trilateral market Coupling
• Multilateral European perspective

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From Trilateral to Multilateral solution
Statnett
Nord pool

• TLC NL-B-France
• NorNed cable
• APX, Nord Pool, TSOs
• Co-operation with
• Belgian, French partners
• Further extension possible

TenneT
APX
Bel- pex
Elia
Power next
RTE
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Linking two regions

• NorNed cable links two regions, already
  internally coupled
• TLC region Netherlands, Belgium, France
• Nordic region Norway, Sweden, Finland, Denmark
• Steering committee established
• 4 exchanges APX, Belpex, Nord Pool, Powernext
• 4 TSOs Elia, RTE, Statnett, TenneT
• Aim at an enduring solution with European scope
• Possible interim solution for live-date of cable
  October 2007

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Develop an enduring solution

• Enduring solution
• MMC Multilateral Market Coupling
• Optimize Nordic and TLC region
• Open solution, other interested parties will be
  invited to contribute as the project progresses
  
• E.g. Spain, UK, Germany, Poland, Baltic
  countries, others
• Able of coupling many regions
• Flow-based, able to handle loop flows

Paper by Statnett, TenneT, Elia, RTE, Nord
Pool Spot, APX, Belpex and Powernext presented at
the mini-forum organised by the regulators on
the central North-West European electricity
market, 20 June 2006
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Open system, more possibilities

• Parties committed to facilitating the addition of
  further areas to the approach, open to any other
  new partners (Iberian peninsula, Italy,
  UK/ireland, Germany, Central Europe, Eastern
  Europe)
• Fits with Regional Markets approach as foreseen
  by European Commission, European Regulatory
  Forum

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Mix of implicit and explicit auctions

• Scandinavian model
• only daily cross-border
• No auction of long-term capacity
• All capacity daily allocated in market
  splitting
• Long-term contracts are financial

All Daily capacity
Implicit Auction
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From ATCs to PDTFs

• Currently Available Transmission
• Capacities (ATC)
• Calculation for each border
• Sub-optimal
• Towards PTDFs
• Physical electrical flow paths taken into
  account
• Maximises use of capacity
• but
• Meshing makes more difficultthe carving up
  explicit/implicit
• Need for Long-term Financial Transmission Rights
  
• Daily settlement in flow-based implicit auction
  between PXs
• Roles of TSOs and Power exchanges

Interconnector
Single pricearea
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Summary

• North West European market is integrating fast
• First step Belpex coupling France Belgium
  NetherlandsTrilateral Market Coupling (TLC)
• Based on intensive co-operation between
  exchanges, TSOs
• Due to start soon
• Next step NorNed cable connect TLC and Nordic
  regionsTowards an enduring an Multilateral
  system
• Towards a enduring European, flow-based solution
• Open and accessible system, suitable for more
  countries
• Other exchanges/countries invited to comment and
  contribute

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