Berlin, 23 October 2012

THE PARADIGM SHIFT IN POWER MARKETS

Can you imagine? March 2011

Paradigm Shift in Power Markets2

Can you imagine? June 2012

14.740 1790,21 MW

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1 2 3 ConsequencesImpact on gas-to-power and others

The paradigm shift

AGENDA

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Renewable Market Share - Germany

Paradigm Shift in Power Marketsslide 5

Solar Capacity - Germany

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Large Fluctuations

Source: EEX, CASC, ENTSO‐E & Statkraft

Wind+Solar+Import number of peak hours‐ GERMAN winter ‐

Wind+Solar+Import number of peak hours ‐ GERMAN summer‐

Paradigm Shift in Power Marketsslide 8

1 2 3 ConsequencesImpact on gas-to-power and others

The paradigm shift

AGENDA

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Spot Volatility 2007-2012

Source: EEX, EXAA & Statkraft,

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Price Sensitivity in Winter

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Dark and Spark Spreads

Source: EEX, ICE, Reuters & Statkraft,

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Capacity Development

Erwarteter Zuwachs an Erneuerbarer Energien (GW)

+ 8 GW + 18 GW

Conventional Power Plants‘ planned commissioning (MW) Total Renewables (GW)

Paradigm Shift in Power Marketsslide 13

Market ImpactElimination of summer peak

„Residual load“

High volatility in residual load

Spike risk in winter evenings

Fuel spreads and CO2 under pressure

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1 2 3 ConsequencesImpact on gas-to-power and others

The paradigm shift

AGENDA

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Forecast HorizonThe weather forecast horizon determines up to when an absolute price asessment is possible.

Beyond the horizon price assesments have a high degree of uncertainty.

Shouldn‘t that lead to higher bid-offer spreads?

Could that lead to more transactions due to more disagreement about the fair price?

Or to less transactions due to nobody willing to quote an absolute price?

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Liquidity Shifts to Short TermLiquidity is focussing on the short term.

More and more liquidity intraday but mainly „physical“ players.

Very high volatility intraday, very weather driven.

Intraday will not replace day-ahead. - But who knows what happens at 150 GW of renewables...

Healthy competition amongst exchanges.

Intraday transactions must and will ultimately be automated.

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Gas Fired Power StationsPROs

Can provide the flexibility needed.

Are relatively cheap „back-up“ –both in capex and opex.

Do not emit much.

CONs

Do not make money today.

Burn expensive gas.

Do not need much cheap CO2.

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Market DesignThe missing money problem: Academic excercise or short term threat to security of supply?

Short term: Grid problems. Solutions: Technical, maybe individual redispatchcompensation.

Long term: Definitely improved resource usage and flexible use of renewables; maybe continued overcapacity, maybe improved interconnection, maybe storage technology innovation, maybe local underinvestment.

Future development of the EEG.

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Wrap-upDo not underestimate the paradigm shift.

Liquidity goes short term.

Intraday is becoming a more significant market.

Gas fired power is a good solution but is it the best?

What will be the framework? Hopefully competitive!

Micro-regulation can make a free market turn into a planned economy.

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There is still a lot to do!

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www.statkraft.com

THANK YOUStefan-Jörg GöbelHead of Continental Trading & Origination+49 211 60244-124stefan.goebel@statkraft.de