How Italian electricity market manages network constraints
Rome, Turin, September 2007
- 2 -
2
• Market Structure
• Transmission limits
Agenda
- 3 -
3 Market Structure
PCEPCE
IPEXIPEX
• Electronic Platform by which market players register
commercial transactions and related programs of
consumption or production, after the conclusion of private
contract agreement (OTC agreements)
• A 24 hours Electronic Market, by which market players can
buy or sell electric energy
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4 IPEX Market – a Brief description
Phase Description Assignment Price Time
• MGP
• By Day Before Market (MGP), market players make bids and offers, proposing:
– the Quantity to buy or to sell– the Maximum price /
minimum price for MWh
• Selling: Zonal price • Buying: Unique
National Price (UNP)*
• Start: T-9 dd• End: T-1 dd (9.00 am)
• MA1
• By Adjustment Market (MA1), market players are able to modify programs defined during MGP
• Selling: Zonal price • Buying: Zonal price
• Start: T-1 dd (10.30 am)
• End: T-1 dd (14.00 pm)
• MSD
• By Dispatching Services Energy Market (MSD), TERNA spa **, buys or sells dispatching services
• See MSD Details • See MSD Details
Note: T = The day in which electric energy is physically exchanged
** Society which manages Italian Electric System
By Ipex:• Market Players join to an implicit auction market to buy or sell Electric
Energy • Terna guarantees the equilibrium of Italian Electric System
* Consumers who use UCVs (Unit of virtual consumption) or Pump plants pay Zonal Price
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5 IPEX Market – Buying and selling price
PricePrice CalculationCalculation
• Zonal Price
MWh
Eu
ro/M
Wh
Equilibrium PriceEquilibrium Quantity
D
S
• UNP• For each hour UNP is: weighted average of Geographic zonal prices
(weight = Consumed quantity):
Σ(Pi X Qi)
Σ Qi
with:
i= referring zone ; Q = Bought Quantity; P= Zonal Price
• If there isn’t zonal congestion, there is only one zonal price which
coincides with UNP
• UNCONSTRAINED
UNP
• Unconstrained UNP is calculated intercepting national demand curve
and national offer curve (hypothesis of no transmission limits)
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6 IPEX Market – MSD Details
Day Before MSD Real time MSD
• Dispatching services
• To Resolve System congestions
• To Guarantee storage margin
• To Balance Italian Electric Energy System in real time
• Plants• Units of production admitted
by TERNA• Units of production admitted
by TERNA
• Players • Dispatching service players • Dispatching service players
• Price • Proposed Price • Proposed Price
• Time• Start: T-1 dd (14.30 pm)• End: T-1 dd (16.00 pm)
• Real Time
By Dispatching Services Energy Market (MSD), TERNA spa buys or sells dispatching servicesBy Dispatching Services Energy Market (MSD), TERNA spa buys or sells dispatching services
Real time MSD permits to resolve unexpected lack of balance
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7 PCE - Overview
Acceptance /
Refusing
Transaction
proposalProgramming IPEX Market Final Result
Player:
Time:
Description:• PCE player makes a
transaction proposal,
choosing his counterpart,
the kind of transaction
(selling or buying); the
profile of transaction
(Baseload; peak…); the
account to use; the
referring period; the
bound code and the
quantity
• PCE player
• T-60 dd to T-2 dd;
with T = the day in
which the electric
energy is exchanged
physically
Commercial PhaseCommercial Phase
Price: • The price is
established by
parties privately
and it mustn’t be
specified in
transactions
• Counterpart refuses
or accepts proposal.
In case of
acceptance,
Counterpart
indicates the bound
code, his referring
account and quantity
(which must be
equal to offered/bid
one)
Physical PhasePhysical Phase
• PCE player
• The price is
established by
parties privately
and it mustn’t be
specified in
transactions• Offer/bid day to T-2
dd; with T = the day in
which the electric
energy is exchanged
physically
• PCE Player can
choose the units by
which he sells or buys
energy
• Quantity programmed
could be equal or less
to the quantity bought
or sold in commercial
phase *
• PCE Player
• The limit Price can be
indicated during
programming (only
for IPEX market
players)
• Deadline: T-1 (8,30
am); with T = the day
in which the electric
energy is exchanged
physically
• GME
• GME generates
PGM files, which
resume PCE Player
programs
• Programs are sent
to IPEX
automatically
• GME runs the day
before market
• T-1 dd; with T = the
day in which the
electric energy is
exchanged physically
• GME provides
offers or bids
results, by PGM
files and BUS files
• GME
• N/A
• T-1 dd; with T = the
day in which the
electric energy is
exchanged physically
• Zonal price
• UNP
* see details on following slide
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8
60 MWh
40 MWh
20 MWh
20 MWh
10 MWh
CEOP1
CEOP4
CEOP5
Operatore di Mercato
PCE
PCE – Focus on transactions
• The maximum quantity
which can be loaded on an
account is equal to the
sum of margins which
compose the account
• The maximum quantity
which can be loaded on an
account is equal to the
sum of margins which
compose the account
By commercial phase, market players can act as traders
CEOP3
CEOP2
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9
Op1 Op2 Op3 Op4 Op5
Op1 -100 +60 +40 - -
Op2 -60 +50 +10
Op3 -40 0 +20 +20
Op4 - - -20 +20 -
Op5 - -10 -20 - +30
60 MWh
40 MWh
UPOP1
UPOP1
UCAOP2
50 MWh
UCAOP5
30 MWh
UCAOP4
20 MWh
PCE – Focus on programming
All the quantity bought/sold in commercial phase can / must be nominated
on physical programs of injection or withdrawal
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10 Agenda
• Market Structure
• Transmission limits
– Transmission limits overview
– Transmission limits and IPEX Market
– Transmission limits and PCE Market
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11
SLOVENIA
FRANCE
AUSTRIASWITZERLAND
350
2502260
2400
300
Summer situation (Example)Summer situation (Example)
100
60
0
39002000
20002200
3100
11
00
500
GREECE
Geographical Zones with Transmission Constraints
NotesNotes
• The possibility to buy/sell electric energy
from a zone to another is bound by:
• Transaction Limits fixed by TERNA
• Physical limits connected whit units
capacity (units margin) fixed by TERNA
• Generalized limits, a composing of
transaction limits which exist actually,
could help to manage congestion in critical
area
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12
Flowscompatible
with AvailableTransmission
Capacity?
Flowscompatible
with AvailableTransmission
Capacity?
Injection/WithdrawalSchedules Satisfying
AvailableTransmission Capacity
Injection/WithdrawalSchedules Satisfying
AvailableTransmission Capacity
Single National
Price
Single National
Price
Price of Importing
Zone
Price of Importing
Zone
Price ofExporting
Zone
Price ofExporting
Zone
Zonal Selling Prices
Zonal Selling Prices
>
NO
YES
Market Splitting Market Splitting
NationwideInjection/
WithdrawalSchedules
NationwideInjection/
WithdrawalSchedules
EnergyFlows
betweenZones
EnergyFlows
betweenZones
UniformPurchasing
Price
UniformPurchasing
Price
Market splitting Mechanism
Market splitting mechanism allows to manage Italian Electric System
Congestions
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13Advantages of Market splitting system
Short time
efficiency
Short time
efficiency
Long time
efficiency
Long time
efficiency
Reduction of
electric
energy costs
Reduction of
electric
energy costs
• Market chooses the best available plants, in respect of the existing limits, minimizing the costs of
production and allowing an efficient use of Electric Italian Network• Electric energy flows from lower price zones to higher price ones
• New investments are attracted by the highest costs of electric energy supply. Consequently: Prices difference between different zones is going to be reduced Power difference between different zones is going to be reduced
• UNP is lower than unconstrained UNP if: The Price reduction of exporting zones is higher than the price rising in importing zones The price reduction involves higher volumes than price rising (Italian case**)
• Reduction of electric energy cost can be calculated as (UNP unconstrained – UNP ) X Q, where Q is
the electric energy exchanged hourly
Revenues
from
congestion
Revenues
from
congestion
• Implicit revenues: in the spot market, revenues from congestion are given from the gap between the
two zonal price (Pz import – Pz export) X QF, where Pz Import > Pz export and QF is the maximum
interconnection capacity from the exporting zone to the importing one• Explicit revenues: in the OTC programs, revenues from congestion are called CCT (Corrispettivo
Capacità di Transito) and are paid by producers explicitly*. They are calculated as the delta between
zonal price in which the production plant is situated and UNP
Minor
congestion
costs
Minor
congestion
costs
• Inter-zonal congestions are resolved in MGP market, with a reduction of cost in Dispatching Service
Market (where electric energy price is the offered one; pay as bid)
* CCT are paid by consumers who uses UCV Units or Pump Plants too **see details on following slide
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14
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Reduction of electric energy costs – An Example
= UNP
= Unconstrained UNP
€ / Mw
HOUR
14th August14th August
= Quantity (MWh)
= Price (€/MWh)
14th August, 21° Hour *14th August, 21° Hour *
59,9159,91
93,6693,66
93,6693,66
93,6693,66
93,6693,66
93,6693,66
93,6693,66
14.09014.090
59,9159,91
3.4423.442
3.6343.634
4.9904.990
534534
2.6292.629
1.5981.598
• UNP = 78,30 € /
MWh
• Unconstrained
UNP = 92,95
• UNP = 78,30 € /
MWh
• Unconstrained
UNP = 92,95
UNP lower than Unconstrained UNP in 21° Hour is a consequence of Market
splitting between North and the rest of Italy * Price and quantity only for zones which determinate UNP
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15Revenues from congestion – An example
14th August, 21° Hour14th August, 21° Hour
SWITZERLAND
E_NW
2.500
1.180
93,6693,66
59,9159,91
= Separated Zone
= Price (€/MWh)
42,0042,00
59,9159,91
= Energy Flow
RevenuesRevenues
ΣΣ (PZ import-PZ export )X QF =
(93,66-59,91)X2.500+(59,91-
42,00)X1.180=
84.375+21.133= 105.509 €
Revenues amount to 105.509 € for the 21° hour of 14° August
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16
DA AFRANCIA ESTERO NORDOVEST 450 (1.891) 79,6% (84,6%) 30,8% (2,5%) 6,6% (7,6%)ESTERO NORDOVEST FRANCIA ? (?) 13,8% (7,8%) - (-) - (-)SVIZZERA ESTERO NORDOVEST 1.132 (2.563) 84,9% (93,4%) 41,2% (4,7%) - (-)ESTERO NORDOVEST SVIZZERA ? (?) 15,1% (6,6%) - (-) - (-)AUSTRIA ESTERO NORDEST 104 (750) 96,7% (89,9%) 19,0% (5,1%) 1,8% (3,4%)ESTERO NORDEST AUSTRIA ? (?) 1,2% (6,5%) - (-) - (-)SLOVENIA ESTERO NORDEST 184 (862) 96,9% (95,9%) 3,8% (2,2%) - (1,1%)ESTERO NORDEST SLOVENIA ? (?) 3,1% (1,7%) - (-) - (-)ESTERO NORDOVEST NORD 7.088 (5.882) 97,1% (99,9%) - (0,1%) - (-)NORD ESTERO NORDOVEST ? (?) 2,9% (0,1%) - (-) - (-)ESTERO NORDEST NORD 760 (642) 100,0% (99,9%) - (0,9%) - (-)NORD ESTERO NORDEST ? (?) 0,0% (0,1%) - (-) - (-)MONFALCONE NORD 1.454 (948) 100,0% (100,0%) 1,4% (-) - (-)NORD MONFALCONE ? (?) - (-) - (-) - (-)TURBIGO NORD 2.102 (2.098) 53,4% (55,2%) 0,1% (0,1%) - (-)NORD TURBIGO ? (?) 29,6% (34,7%) - (-) - (-)NORD CENTRO NORD 2.738 (3.270) 89,4% (96,9%) 34,3% (17,4%) - (-)CENTRO NORD NORD 1.682 (1.802) 10,6% (3,1%) 0,7% (0,0%) - (-)CENTRO NORD CORSICA 279 (299) 64,2% (66,9%) 16,1% (15,3%) 5,6% (5,3%)CORSICA CENTRO NORD 238 (250) 30,1% (27,5%) 2,8% (0,6%) 5,6% (6,5%)CORSICA SARDEGNA ? (?) 54,9% (61,4%) - (-) 5,2% (4,1%)SARDEGNA CORSICA 301 (300) 39,9% (34,4%) 2,5% (2,0%) 5,2% (4,1%)SARDEGNA ESTERO CORSICA 38 (-) - (-) - (-) - (-)ESTERO CORSICA SARDEGNA 38 (-) - (-) - (-) - (-)ESTERO CORSICA CORSICA CA ? (?) - (-) - (-) - (-)CORSICA CA ESTERO CORSICA ? (?) - (-) - (-) - (-)CENTRO NORD CENTRO SUD 1.944 (8.554) 68,4% (87,6%) 1,4% (2,2%) - (-)CENTRO SUD CENTRO NORD 2.260 (2.243) 31,6% (12,4%) 2,0% (0,1%) - (-)CENTRO SUD SUD 2.120 (2.097) 21,4% (66,7%) 0,0% (0,3%) - (-)SUD CENTRO SUD 1.999 (2.015) 78,6% (33,3%) 0,8% (0,0%) - (-)FOGGIA SUD 868 (-) 60,8% (-) 0,1% (-) 2,6% (-)SUD FOGGIA ? (-) - (-) - (-) - (-)SUD ROSSANO ? (?) - (-) - (-) - (-)ROSSANO SUD 4.270 (4.324) 100,0% (100,0%) 17,5% (2,6%) - (-)ROSSANO CALABRIA 7.932 (814) 91,1% (77,3%) 5,3% (0,5%) 1,8% (4,6%)CALABRIA ROSSANO ? (?) 7,1% (18,1%) - (-) 2,6% (5,9%)CALABRIA SICILIA 140 (100) 58,4% (19,9%) 37,6% (13,0%) 2,9% (11,8%)SICILIA CALABRIA 462 (435) 39,1% (75,8%) 5,3% (13,6%) 3,1% (1,3%)PRIOLO SICILIA 804 (796) 95,3% (95,5%) 15,9% (5,2%) - (-)SICILIA PRIOLO 600 (600) 3,9% (4,5%) - (-) - (-)ROSSANO BRINDISI ? (?) - (-) - (-) - (-)BRINDISI ROSSANO 4.403 (4.397) 100,0% (100,0%) 4,4% (0,7%) - (-)BRINDISI ESTERO SUD 500 (501) 26,3% (11,1%) - (-) 4,7% (4,2%)ESTERO SUD BRINDISI 434 (501) 51,1% (30,5%) 0,0% (0,4%) 8,7% (4,2%)ESTERO SUD GRECIA 250 (217) 25,0% (10,9%) 1,9% (0,2%) 4,7% (1,6%)GRECIA ESTERO SUD 217 (217) 44,7% (7,5%) 0,3% (-) 8,6% (1,6%)
TRANSIT AVERAGE LIMIT USED SATURATED OUT OF ORDER
MWh % Hours % Hours % Hours
Transits management (2006)
(…) 2005 data
- 17 -
17
0
2.000
4.000
6.000
8.000
10.000
12.000
New Plants 2005 North MacrozoneNew Plants 2006
South MacrozoneNew Plants 2006
South MacrozoneClosed Plants 2006
New Plants 2005-2006
Production plants renewal
5.700
2.000
3.000
- 2.100
8.600
MW
• Inefficient Plants (high
value of merit order)
• Inefficient Plants (high
value of merit order)
Building of new plants for 8.600 MW in Italy, in the last two years
- 18 -
18 Italian Electric System – 2007 Structure vs 2004
Italian Electric System - 2007Italian Electric System - 2007
FRANCIAFRANCIA SVIZZERASVIZZERA AUSTRIAAUSTRIA SLOVENIASLOVENIA
ESTERO NORD
OVEST
ESTERO NORD
OVESTESTERO NORD ESTESTERO NORD EST
NORDNORD
CENTRO-NORDCENTRO-NORD
CENTRO-SUDCENTRO-SUD
SUDSUD
ROSSANOROSSANO
CALABRIACALABRIA
SICILIASICILIA
TURBIGO-
RONCO
TURBIGO-
RONCO
CORSICACORSICA
SARDEGNASARDEGNA
ESTERO
CORSICA
ESTERO
CORSICA
CORSICA ACCORSICA AC
PRIOLOPRIOLO
MONFALCONEMONFALCONE
BRINDISIBRINDISI
ESTERO SUDESTERO SUD
GRECIAGRECIA
FOGGIAFOGGIA
VIRTUAL ZONEVIRTUAL ZONE
PHYSICAL ZONEPHYSICAL ZONE
FRANCIAFRANCIA SVIZZERASVIZZERA AUSTRIAAUSTRIA SLOVENIASLOVENIA
ESTERO NORD
OVEST
ESTERO NORD
OVESTESTERO NORD ESTESTERO NORD EST
NORDNORD
CENTRO-NORDCENTRO-NORD
CENTRO-SUDCENTRO-SUD
SUDSUD
ROSSANOROSSANO
CALABRIACALABRIA
SICILIASICILIA
TURBIGO-
RONCO
TURBIGO-
RONCO
CORSICACORSICA
SARDEGNASARDEGNA
PRIOLOPRIOLO
MONFALCONEMONFALCONE
BRINDISIBRINDISI
GRECIAGRECIA
Italian Electric System - 2004Italian Electric System - 2004
PIOMBINOPIOMBINO
- 19 -
19 Agenda
• Market Structure
• Transmission limits
– Transmission limits overview
– Transmission limits and IPEX Market
– Transmission limits and PCE Market
- 20 -
20
0
20
40
60
80
100
120
140
160
180
200
Unconstrained UNP vs UNP – 1° Week of July, 2007
= UNP
= Unconstrained UNP
€ / MWh
- 21 -
21 Unconstrained UNP vs UNP – Delta 2007 vs Delta 2005 (1° Week of July)€ / MWh
= Delta 2007
= Delta 2005
-20
-10
0
10
20
30
40
50
60
Lower Price
zones volume <<
Higher price
zones volume
Lower Price
zones volume <<
Higher price
zones volume
- 22 -
22 Agenda
• Market Structure
• Transmission limits
– Transmission limits overview
– Transmission limits and IPEX Market
– Transmission limits and PCE Market
- 23 -
23 CCT assumptions
• Electric Producers* when act on PCE pay or receive CCT
(Corrispettivo Capacità di Transito) in case of congestion
• CCT is calculate, for each hour and zone, as:
(Pz-UNP) X QzWith:– Q the OTC programmed quantity accepted on IPEX after MGP running
– z the referring zone
• Electricity moves from lows to high price zones:– If Zonal Price is minor than UNP, a producer is contributing to congestion and he
pays CCT
– If Zonal Price is major than UNP, a producer isn’t contributing to congestion ad
he receives CCT
* Electric consumers owners of UCV units or Pump Plant pay/receive CCT too, when they use this kind of units
- 24 -
24
-60
-40
-20
0
20
40
60
Nord CALB CNOR CSUD
SARD SICI SUD
CCT Trend example – From 11° to 20° July 2007*
€ / MWh
Congestion frequent in North and South of Italy* Italian zones only