Amsterdam Power

eXchange

An auctioned electricity marketAn auctioned electricity market

B. Den OudenB. Den Ouden

CEO, Amsterdam Power Exchange CEO, Amsterdam Power Exchange Spotmarket BVSpotmarket BV

Pagina 2

Amsterdam Power

eXchangeIndependent Independent

Shareholder: grid company 100%Shareholder: grid company 100% Shareholder grid company: Dutch Shareholder grid company: Dutch

statestate Completely independentCompletely independent

Firm trading systemFirm trading system Back-up systemsBack-up systems

AlwaysAlways produces a price produces a price

Dutch state

Grid operator TenneT

AmsterdamPower

eXchange

100%

100%

Pagina 3

Amsterdam Power

eXchange

Daily spot market: 2-sided auction, Daily spot market: 2-sided auction, anonymous bids, batch process anonymous bids, batch process

0,0

500,0

1.000,0

1.500,0

2.000,0

2.500,0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

0,005,0010,0015,0020,0025,0030,0035,0040,00MWh Eur

Prijs

Hoeveelheid

AanbodVraag

marktprijs

Verhandeld volume

24x + blocks:

Daily program

Conditional bids

Pagina 4

Amsterdam Power

eXchangeFull bid curve transparencyFull bid curve transparency

curves\curves.html

Print this page

Pagina 5

Amsterdam Power

eXchange

Monthly base price average

€ 26,24

€ 51,03

€ 40,12

€ 83,98

€ 32,64

€ 49,99

€ 34,62€ 29,83

€ 25,91

€ 0,00

€ 25,00

€ 50,00

€ 75,00

€ 100,00

J anuary Febuary March April May J une J uly August September October November December

Pri

ce

2003

2002

2001

Price (movements)Price (movements)

Av. 2001: 33 €/MWh Av. 2002: 30 €/MWh

Pagina 6

Amsterdam Power

eXchange

Spot volumes as % of national Spot volumes as % of national consuptionconsuption

% Yearly traded volume of Dutch Consumption

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

1999 2000 2001 2002 2003

Pagina 7

Amsterdam Power

eXchangeMarket suffers somewhat…Market suffers somewhat…

ENRON demiseENRON demise

USA traders have left the stageUSA traders have left the stage

Ongoing mergers/consolidationsOngoing mergers/consolidations

Market power issuesMarket power issues

Skepticism about electricity liberalizationSkepticism about electricity liberalization

Pagina 8

Amsterdam Power

eXchangeNo. of market parties directly activeNo. of market parties directly active

0

10

20

30

40

50

60

1999 2000 2001 2002 2003

Dutch electricity

UK electricity

UK gas

Pagina 9

Amsterdam Power

eXchangeAcquisitionsAcquisitions

First combined First combined exchange in electricity exchange in electricity & natural gas & natural gas

International International

Multi-commodity Multi-commodity

Added valueAdded value

Brand in EuropeBrand in Europe

APXUK

EnMO

Pagina 10

Amsterdam Power

eXchangeMonthly volumesMonthly volumes(gas scale 50% reduced)(gas scale 50% reduced)

Monthly volumes gas volume scaled down by 50%

0

500

1000

1500

2000

2500

3000

3500

4000

5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9

1999 2000 2001 2002 2003

GWh/monthelectricity

0

1000

2000

3000

4000

5000

6000

7000

8000

Dutch electricity UK electricity

UK gas

GWh/month Natural gas

Pagina 11

Amsterdam Power

eXchangeVolumes UK gas: EnMO Volumes UK gas: EnMO

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

11,0

Oct

Jan

Apr Ju

l

Oct

Jan

Apr

il

July

Oct

Jan

Apr

July

Oct

Jan

Apr

July

GPF BoW

GPF WDNW

GPF Weekend

GPF Days

OCM Physical

OCM Locational

OCM Title

Mln MWh/mnd

Pagina 12

Amsterdam Power

eXchangeBelgium and the Netherlands: Belgium and the Netherlands: physical flowsphysical flows

‘Rare’

87%

36%

29%21%

91%

93%

10%

Pagina 13

Amsterdam Power

eXchange

Implicit auctioning: Implicit auctioning: partial in the first step? partial in the first step?

Belgium-Dutch border:Belgium-Dutch border:

Yearly auctionYearly auction325325

Monthly auctionMonthly auction225225

Daily explicit auctionDaily explicit auction~ 550 MW~ 550 MW

Daily Daily implicitimplicit auction auction~ 550 MW~ 550 MW

Long term contracts: still physical in this phaseLong term contracts: still physical in this phase

Pagina 14

Amsterdam Power

eXchange

Development into full market Development into full market couplingcoupling

Belgium-Dutch border:Belgium-Dutch border:

Yearly auctionYearly auction325325

Monthly auctionMonthly auction225225

Daily explicit auctionDaily explicit auction~ 550 MW~ 550 MW

Daily Daily implicitimplicit auction auction~ 1100 MW~ 1100 MW

Long term contracts: financial Long term contracts: financial

Pagina 15

Amsterdam Power

eXchangeTrading system for implicit auctioning:Trading system for implicit auctioning: Exchange price varies with potential im/exportExchange price varies with potential im/export

Price

Volume

Price:

exports

with exports >

isolated area >

imports

with imports >

Pagina 16

Amsterdam Power

eXchangeImplicit auctioningImplicit auctioningPrice Elasticity Curves for each areaPrice Elasticity Curves for each area

AreaPrices

Exports Imports

Isolated price X

Isolated price Y

price of

area Y

price of

area X

Elasticity curves

Depicting price influence of potential im/exports to/from each individual area

0© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl

Pagina 17

Amsterdam Power

eXchangeImplicit auctioning: coupling the areas Implicit auctioning: coupling the areas Import in X = export in YImport in X = export in Y

AreaPrices

Flow X->Y Flow Y-> X

Isolated price X

Isolated price Y

price of

area Y

price of

area X

Daily capacity ?

To be supplied by TSO’s………

0© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl

Pagina 18

Amsterdam Power

eXchangeImplicit auctioning: unconstrainedImplicit auctioning: unconstrained

AreaPrices

Flow X->Y Flow Y-> X

price of

area Y

price of

area X

Unconstrained case

Price for both areas identical: enough capacity to set price at intersection of curves

0© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl

Area price X = Area price Y

Available transmission capacity

Pagina 19

Amsterdam Power

eXchangeImplicit auctioning: constrainedImplicit auctioning: constrained

AreaPrices

Flow X->Y Flow Y-> X

price of

area Y

price of

area X

Constrained case

Prices for areas differ: set at maximum im/exports

0© June 2003 Amsterdam Power Exchange Spotmarket BV www.apx.nl

Area price X

Area price Y

Available transmission capacity

Pagina 20

Amsterdam Power

eXchange

Block bids: user-definable multi-hourBlock bids: user-definable multi-hourSuited for thermal generation Suited for thermal generation

0,0

500,0

1.000,0

1.500,0

2.000,0

2.500,0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

40,00MWh Eur

Supply Blocksexample

Demand BlocksExample

+ “price peak shaving”

Pagina 21

Amsterdam Power

eXchange

Some improvements of auction Some improvements of auction systemsystem

Old systemOld system New systemNew system

HandlingHandling Centrally, internetCentrally, internet Local clientLocal client

Preparation bidsPreparation bids Only on-lineOnly on-line Off-line + on-lineOff-line + on-line

SpeedSpeed Slow to Medium Slow to Medium Fast to very FastFast to very Fast

Data im/exportData im/export Typing + “bid Typing + “bid generator”generator”

Copy&paste: Copy&paste: XML, ExcelXML, Excel

Security settingsSecurity settings Limited, central onlyLimited, central only Many, locally Many, locally customizedcustomized

AlgorithmAlgorithm LicensedLicensed Own developmentOwn development

IT maint./operat.IT maint./operat. OutsourcedOutsourced Partly in-housePartly in-house

Back-upBack-up CumbersomeCumbersome AutomatedAutomated

Pagina 22

Amsterdam Power

eXchange

Bid interfaceBid interface

Pagina 23

Amsterdam Power

eXchangeIt’s not only auctions….It’s not only auctions….

Continuous trading systemContinuous trading system

Developed for: Developed for: – Electricity market UKElectricity market UK– Other productsOther products– Derivatives marketsDerivatives markets

Possibility to combine with auctions in one Possibility to combine with auctions in one systemsystem

““One stop shop”One stop shop”

Pagina 24

Amsterdam Power

eXchange……but auctions are still the best!but auctions are still the best!(At least for our type of market)(At least for our type of market)

Fast and reliableFast and reliable Easy, user-friendyEasy, user-friendy Concentrate all the daily liquidityConcentrate all the daily liquidity Integrate hourly trading & block tradingIntegrate hourly trading & block trading Enable implicit cross-border auctionsEnable implicit cross-border auctions Generate one clear index for OTC reference and Generate one clear index for OTC reference and

derivativesderivatives

sound basis for financial marketsound basis for financial market