facilitating flexible trading and res integration...

© EPEX SPOT SE - Any use of the information contained in this document is expressly prohibited without the written consent of EPEX SPOT SE

Facilitating flexible trading and RES integration through

organized power markets

David ASSAAD – Head of European Market Integration & Coupling

EPEX SPOT SE

EPG 2012 Summit

Prague | December 4, 2012

2

Agenda

1. Power spot markets role and usage

2. Impact and management of RES penetration in the market

3. Flexible portfolio management: Intraday market developments

4. Outlook: Which role for the market in the future?


3

Europe is Relying on Free Markets…

© EPEX SPOT SE – Any use of information contained in this document is expressly prohibited without prior written consent of EPEX SPOT SE

(Recent statement of European Commissioner for Energy, Günther H. Oettinger)

« Let us for a moment imagine how our energy landscape would look

like without an internal energy market. We would have 27 markets in

Europe, with widely diverging market rules and network operation

rules. Gas and electricity would not flow freely accross borders.

Energy companies would not be able to take full advantage of

economies of scale. The level of competition would be much lower,

with less choice for customers. Security of energy supply would be a

significant concern in many Member States, in particular in those

depending on a single supplier without being adequately

interconnected with other Member States. And meeting our climate

change objectives with 27 markets would be much more expensive

and much less efficient. Without an internal energy market Europe

would be vulnerable. We would all pay the price. »

4

The wholesale marketThe third pillar of the energy value chain


5

The role of the Exchange in the timeline

of the market


6

Products of EPEX SPOT

Day-Ahead Intraday


7

Who are buyers and sellers on EPEX SPOT?

In total, EPEX SPOT holds

200 Exchange Members

(Day-Ahead & Intraday)

as of 6 November 2012

Germany / Austria96

France15

Switzerland3

30

47

9


8© EPEX SPOT SE - Any use of the information contained in this document is expressly prohibited without the written consent of EPEX SPOT SE

Who are buyers and sellers on EPEX SPOT?

9

3 EPEX SPOT Markets

• Germany/Austria

• France

• Switzerland

+ Hungarian Day-Ahead Market on behalf of the

Hungarian Power Exchange HUPX

+ Coupling services for Slovakian OKTE,

Czech OTE and HUPX

The Markets of EPEX SPOT

© EPEX SPOT SE – Any use of information contained in this document is expressly prohibited without prior written consent of EPEX SPOT SE

6 Market Segments

• Auction Germany/Austria

• Auction France

• Auction Switzerland

• Intraday Germany

• Intraday France

• Intraday Austria

• Intraday Switzerland in Q2 2013

EPEX SPOT’S market areas cover an area of 1,200 TWh of yearly power consumption,

which represents 40% of the EU’s Integrated Electricity Market.

A natural incentive to integrate European power markets, facilitated by harmonised trading systems

EPEX SPOT

1.148 TWh (36 %)

3 price areas

Consumption market areas

19 interconnectors with own

and neighbouring markets

10

Markets, volumes 2011 and delivery zones

Delivery zones:

12.5 % increase of volume in 2011

57 % increase of Intraday volumes in 2011

241 TWh+ 12%

12 TWh+ 30%

314 TWh in 2011

on all EPEX markets

61 TWh+ 13%

Share of national

consumption:

Intraday FR: 1.7 TWh (+ 70%)

Intraday DE: 15.9 TWh (+ 56%)


11

Agenda






12

Energy TransitionDevelopment of Renewable Energy in Germany

Installed Renewable Capacity, 2012-2016Renewable Energy Production, 1990 - 2050

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

100

200

300

400

500

600

700

TW

h

HYDRO WIND ONSHORE

WIND OFFSHORE BIOMASS

SOLAR GEOTHERMY

EU RES IMPORT GROSS CONSUMPTION

CO2 EMISSIONS

20%

35%

80%

65,4

72,0

79,0

86,3

94,0

0

10

20

30

40

50

60

70

80

90

100

2012 2013 2014 2015 2016G

W

HYDRO GAS BIOMASS

GEOTHERMY WIND ONSHORE WIND OFFSHORE

SOLAR TOTAL

Analysis: EPEX SPOT; Sources: BMU, TSOs

13

0

100

200

300

400

500

600

700

800

0

20

40

60

80

100

120

140

160

180

200

The new form of marketing renewable electricity

through TSOs on the spot exchange is well

adapted to trade those volumes successfully and

transparently.

BUNDESNETZAGENTUR, EVALUATION REPORT 2012

“

“

GW

h

€/M

Wh

Market- & System integrationRenewables on EPEX SPOT – AusgleichsMechV

Increased liquidity

No break in price trend

No increase in volatility

Enhanced transparency

Reduction of marketing costs

Source: EPEX SPOT

Weekly EPEX DAM DE/AT Prices & Volumes, 2009-2012

14

-

10

20

30

40

50

60

70

j-1

1

f-1

1

m-1

1

a-1

1

m-1

1

j-1

1

j-1

1

a-1

1

s-1

1

o-1

1

n-1

1

d-1

1

j-1

2

f-1

2

m-1

2

a-1

2

m-1

2

j-1

2

j-1

2

a-1

2

s-1

2

GW

Feed-In Tariff Direct Marketing (Market Premium)

Direct Marketing (Green Power Privilege) Direct Marketing (Other)

Market- & System integrationRenewables on EPEX SPOT – Market Premium

High penetration of the Market Premium Model

Sep. 2012: ~ 40% of installed RES capacities

Increased activity on the exchange of several

Direct Marketers

Flexibility of production reduced to a few hours

Market Model of Renewable Capacities, 2011-2012

21,8 GW

1,7 GW

1,6 GW0,5 GW

0,3 GW

Wind Onshore

Biomass

PV

Hydro

Wind Offshore

15

Volumes [MWh]

Pri

x [€

/MW

h]

MC

PM

CP

*

Feed-In Priority & Intermittency Influence on Price Formation

0%

5%

10%

15%

20%

25%

30%

35%

40% Spread Peak-Base (FR) Spread Peak-Base (DE/AT)

0

20

40

60

80

100

120

140

0

10

20

30

40

50

60

70

0 8

16

24

32

40

48

56

64

72

80

88

96

10

4

11

2

12

0

12

8

13

6

14

4

15

2

16

0

16

8

17

6

18

4

Wind forecast[MW] (left)

Residual load [MW] (left)

Exchange price [€/MWh] (right)

D1 D2 D3 D4 D5 D6 D7 D8

Merit-Order

Effect

Change of

Peak-Base structure

Steep

production ramps

1. 2. 3.

GW €/MWh

16

EPEX SPOT Day-aheadEuropean Market Coupling

Optimal utilization of interconnectors

Reduction of price volatility

Price convergence of market areas in case of

sufficient border capacity (~60% of hours in 2011)

Smoothing effect on negative or positive price spikes

Propagation of extreme weather conditions (i.e. cold

wave, storm front) on other market areas

17

EPEX SPOT IntradayFlexible Trading of Renewables

Introduction of 15-Minute-ContractsIntroduction & coupling of Intraday markets

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

200 000

JAN FEB MAR APR MAY JUN JUL AUG SEP

15min buy + sell volume (lef t, in MWh)

15min share (right, in %)

-

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

200 000

-

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

H1Q

1

H2Q

1

H3Q

1

H4Q

1

H5Q

1

H6Q

1

H7Q

1

H8Q

1

H9Q

1

H10Q

1

H11Q

1

H12Q

1

H13Q

1

H14Q

1

H15Q

1

H16Q

1

H17Q

1

H18Q

1

H19Q

1

H20Q

1

H21Q

1

H22Q

1

H23Q

1

H24Q

1

15min buy + sell volume (lef t, in MWh)Solar gradient (right, in MWh)

18

Enhanced TransparencyTrading Guarantees of Origin on the Exchange

• EEX and EPEX plan standardized exchange for GOs to

increase market maturity.

• Allows preservation of „renewable character“, bundling of

liquidity & transparent reference price.

• Increase confidence in market with secure transactions,

clearing & harmonized KYC processes.

• EEX plans derivative market: delivery on specified date in

the future (ex-ante market)

• EPEX SPOT plans spot market (if liquidity proves

sufficient): immediate delivery (ex-post market).

• ECC manages account in AIB-registry, responsible for

clearing & settlement.

19

Agenda






20

Intraday market

Buy or sell volumes

that were not able to be

traded on the auction

Better ability to

carry out last-minute

optimization of

portfolio, e.g. in case

of an unplanned

power plant outage

Lower balancing

costs through

advanced optimization

possibilities and more

efficient capacity usage

Enables arbitration

between neighboring

countries, provides

opportunities for

cross-border trading

(e.g. DE-FR)

Reasons for trading on the Intraday market


21

• 23rd November 2010:

Single trading system for

France and Germany

(ComXerv)

• 14th of December 2010:

Connection of ComXerv to

the capacity platform

FITS: Flexible Intraday Trading Scheme

Cross-Border trading system

+ Connection to TSOs platform

= FITS (Flexible Intraday Trading Scheme)

Integration of the three trading

platforms to facilitate

cross-border trading


22

• Intraday markets are very active both locally and cross-border

• Cross-border trades represented on average 13% of total traded volume

Cross-border trades facilitated by the Flexible Intraday Trading Scheme (FITS) – Liquidity doubled in France

Intraday volumes


23

15-minute contracts on the German Intraday

• 15-minute contracts were launched 15 December 2011 on the German

Intraday market

• They are designed to:

• Facilitate the trading with fluctuating power sources

• Meet even better offer and demand, especially within hours with big consumption

differentials

• Help with the integration of renewable power sources into the market.

• EPEX SPOT introduced them in reaction to market demands and to

contribute to the German Energy Transition


24

15-minute contracts: Volume development

In September 2012, the total volume traded in 15-minute contracts reached 1 TWh


25

• One European integrated solution, handling the trading and the

capacity allocation functions

• PXs are in charge of both functions using a single IT provider

• The model is made mandatory by law (defined in the CACM

Network Codes and governed by the Day-Ahead / Intraday

Governance Guidelines)

• PXs outside of the cooperative agreement will not be able to offer

cross-border trading to their members anymore, since all cross-

border capacity will be allocated on the single SOB/CMM solution

• Explicit capacity allocation to enable OTC trading will be allowed on

certain borders, for an interim period only

Objectives:1. Allocate implicitly all the Intraday cross-border capacity on a

single platform

2. Pool all the PXs’ Intraday liquidity on a single trading screen

Benefits expected by the Authorities:1. Facilitated cross-border access to Intraday markets

2. Improvement of the intraday liquidity and price-signal

3. Better short-term management of the power system, especially

with regard to intermittent energy

The Intraday Target Model: What and why


26

• Selection of a single provider for an Integrated Capacity Platform

(CMM) and Shared Order Book (SOB) system

• CMM/SOB to be developed and made available to all willing PXs

and TSOs of Europe – pan-European solution

• Requirements to handle common market and network constraints

– local parties in charge of implementation and adaptation to

regional/national specificities

Scope

I.

• PXs and TSOs to handle market and capacity allocation

requirements respectively

• PXs to proceed to select a system provider (by end 2012) –

validation by ACER and TSOs against their requirements

• Target for delivery of the system for local implementation: End Q1

2013 ?

• Regular reporting to ACER and ENTSO-E at European level

throughout the tendering process

Expected

process &

Timeline*

*To be confirmed

with ACER

II.

Tender process for the Intraday system


27

Lack of harmonization of TSOs allocation

and nomination rules (volume tick, time

interval, gate closure time, manual

procedures, losses…) hinders power

trading:

• Operational complexity

• Limitation of cross-border

competition

• Limitation of energy products

available cross-border

The benefits of intraday market integration

are likely to be outweighed by these

constraints

Challenges of the Intraday Target Model



Agenda







OutlookWhich role will the Market play in the future?

Power exchange suitable instrument

for market integration of renewables:

Increased liquidity

Enhanced transparency

Reduction of marketing costs

Renewables impact price formation

during high feed-in & low demand:

Merit-Order Effect

Change of Peak-Base structure

Steep production ramps

Coupling of EU day-ahead & intraday

markets facilitates integration:

Reduced price volatility

Smoothing of price spikes

Flexible trading

On medium to long term, how can national-based policies and market

specificities integrate into a harmonized European Electricity Market?

Harmonization of European support

schemes for renewables

Demand-based renewable supply

reacting to market price signal

Contribution of renewables to system

security

Investment in network infrastructure

Coupling of European Electricity

Markets

Valorisation of storage & demand-

supply

Enhanced transparency for consumers

Based on functioning Energy-Only

markets


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www.epexspot.com

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