Olegs Linkevics

1
The Case Study of Merging of Electricity Markets
in the Baltic Sea Region

• Olegs Linkevics
• R D department, Manager of Development
• TF-1 Chairman
• 12 October 2006
• Riga

2
Table of content (1)

• Introduction
• 1.1. Background and main objectives of the Study
• 1.2. Scope of analysis
• 1.3. Overview of reference materials
• 1.4 Varity of electricity market models
• 1.5 Congestion management principles
• 1.5 Cooperation with other organisations
  forums
• Assessment of efficiency of electricity markets
• 2.1 Reorganisation of electricity sector
• 2.2. Evaluation of existing market models and
  legislation
• 2.3. Impact of public service obligations and
  environmental initiatives
• 2.4. Evaluation of liquidity of electricity
  market
• 2.5. Analysis of wholesale electricity price
  development
• 2.6. Cross-boarder trading issues

3
Table of content (2)

• Assessment of security of electricity supply
• 3.1. Adequacy of generation and transmission
  capacity Energy balances
• 3.2. Investment climate in power sector
• 3.3. Evaluation of operational network security
• 3.4. Efficiency of cooperation between TSOs
• 3.5. Assessment of governmental policies to
  ensure high level of security
• Benchmarking of actions, proposed in EURELECTRIC
  Roadmap
• 4.1. National level
• 4.2. Regional level
• 4.3. BSR level
• Summary of BSR markets
• Conclusions and recommendations
• Reference materials

4
Responsibilities
5
SUMMARY OF BSR MARKETS
6
Unbundling of SO and largest players in the BSR
markets
O ownership, L legal, A accounting, N none
7
Customer switching and price regulation in the
BSR markets
8
Nordic electricity market
9
Polish electricity market
10
Latvian electricity market
11
Byelorussian electricity market
12
Power balances of EU countries of the BSR
(EURELECTRIC)
13
Power balances of non-EU countries of the BSR
14
Renewable Energy Sources in BSR
15
Transfer capacities of cross-border
interconnections between the BSR markets
16
Potential cross-border interconnections
Existing interconnections
New interconnections
BALTREL 5 Priority new interconnections
17
Congestion Management in BSR
18
Electricity prices in BSR power exchanges (20th
September 2006)
19
Electricity prices in BSR power exchanges (18th
January 2006)
20
CONCLUSIONS
21
Conclusions (1)

• Integration of regional electricity markets into
  the common electricity market of the Baltic Sea
  Region is feasible from technical, economical and
  security of electricity supply point of view.
• Nevertheless, there are different issues, which
  might delay the full integration of markets in
  the Baltic Sea Region, such as
• Different market models and legislation,
• Status of liberalisation,
• Lack of reciprocity and market transparency,
• Absence of physical interconnections or
  insufficient capacity of existing
  interconnections,
• Challenging environmental policies and targets.

22
Evaluation of National Markets
15 Green full compliance, yellow -
transitional period, red initial stage 16
Belarus and Russia are not the members of the
European Union and are not responsible for
the performance of the Directive 2003/54/EC.
23
Evaluation of Regional Markets
24
Evaluation of BSR Market
25
RECOMMENDATIONS
26
Need for harmonisation

• There is an urgent need for a harmonisation of
• Availability and liquidity of day-ahead,
  intra-day, balancing and forward markets
• National policies, public service obligations and
  support schemes
• Degree of market opening and Third Party access
• Remaining price regulation and price caps
• Market transparency and information exchange
• Handling of cross-border connections and
  congestions
• Full compatibility and harmonisation of market
  models and legislation is not necessary.

27
Recommended market model
28
Priority Interconnections

• Sweden-Baltic
• Poland-Lithuania
• Poland-Germany
• Finland-Estonia
• Nordic-Germany

29
Equal terms in market development

• EU when considering cross-border power exchanges
  with non-EU countries, should have a right to
  require reciprocity in connection to
• market opening and access to customers,
• nuclear safety,
• environment protection,
• public service obligation,
• fuel market liberalisation
• ...based on relevant Standards and Regulations of
  the European Union.
• A further important aspect to consider is the
  initiative of UPS of Russia to establish a single
  synchronous system with the European systems,
  which requires harmonisation of both technical
  and market standards and rules.

30
Other recommendations (1)

• BALTREL recommends, that national governments
  make their best efforts to avoid using the
  ultimate instruments (such as capacity tendering,
  price regulation) to intervene into the market,
  but rather allow the market itself to provide
  correct price signals for investments in new
  generation capacity and demand response.
• To overcome possible shortage of generation and
  transmission capacity BALTREL recommends greater
  cooperation and information exchange between
  TSOs.
• In order to increase competition and reduce
  market concentration and avoid risks of market
  dominance by few market actors, BALTREL
  recommends to broaden relevant market by
  constructing new interconnections.

31
Other recommendations (2)

• BALTREL recommends allocation of environmental
  and efficiency obligations based on transparent
  and clear rules. Harmonised and market-based
  support mechanism, such as certificate system,
  for renewable energy and cogeneration is an
  important tool for successful merging of
  electricity markets.
• BALTREL encourages the development of larger
  regional markets to reach environmental and
  efficiency targets.

32
Other recommendations (3)

• BALTREL proposes to set up the detailed Study on
  merging of electricity markets with the
  evaluation of impact of the Strategy
  implementation on market participants, actors and
  electricity consumers in each of the merging
  markets, advantages and disadvantages of the
  Strategy, estimation of possible costs and
  benefits of the Strategy and evaluation of
  economical and social aspects. BALTREL could
  contribute to the Study.

33
WWW.BALTREL.ORG