Old Markets - New Markets: an Internal Energy Market beyond 2014?
NAREM-Workshop, Essen
Robert Wand
07 May 2013
First, Second, and Third Best…
• Theory:
• first best solution according to textbook economics
• nodal pricing, energy only market
• Policy:
• second best solution by European Target Model
• zonal electricity markets, energy only market?
• Practice – the devil‘s in the detail:
• a third best solution: market and system interact!
• national market designs and the “single” Internal Energy Market
• Quo vadis energy market?
07 May 2013 NAREM-Workshop, Essen 2
The European Target Model and Network Codes
Explicit Auctions
Spot Market Day-Ahead: hourly contracts
Intraday: hourly contracts or 15min-
contracts
UIO
SI
Implicit Auctions
Yearly Auction
Day-Ahead (Flow-based
Market
Coupling)
Yearly Capacity
bilateral (NTC)
Monthly Capacity
bilateral (NTC) Monthly Auctions
Nom
ina
tio
ns
(D-1
) Forward Market Yearly transmission rights
Monthly transmission rights
M-1 D D-1 D-2 M-12 Y-1
FB
-Para
mete
r
Intraday (continuous trading)
Forward NC CACM NC (+ Governance GL)
Balancing
NC
Operational Planning and Scheduling NC
Delivery
07 May 2013 NAREM-Workshop, Essen 3
Regional Implementation – Where are we?
Nordic
Countries
UK &
Ireland
Central
Western
Europe
Baltic
Countries
Central
Eastern
Europe
Central
South
Europe South
Western
Europe
North
Western
Europe
CWE Market Coupling
CWE Flow-Based Capacity
Calculation
Trilateral Market Coupling
(CZ, SK, HU), extension by PL,
RO planned
NWE Market Coupling
(currently Interim Tight Volume
Coupling)
Central CWE/CSE Long-Term
Product Auction Platform
Regions with TenneT‘s involvement
EN
TS
O-E
Bid
din
g Z
on
e S
tud
y
(CA
CM
NC
earl
y i
mp
lem
en
tati
on
)
07 May 2013 NAREM-Workshop, Essen 4
First, Second, and Third Best…
• Theory:
• first best solution according to textbook economics
• nodal pricing, energy only market
• Policy:
• second best solution by European Target Model
• zonal electricity markets, energy only market?
• Practice – the devil‘s in the detail:
• it’s a third best solution: market and system interact!
• national market designs and the “single” Internal Energy Market
• Quo vadis energy market?
07 May 2013 NAREM-Workshop, Essen 5
Denmark West Denmark East EPEX (Germany)
DKK/MWh Day Ahead Prices, 25/12/2012
-1800
-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
200
400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
© Energinet.dk
Nord Pool Spot / EPEX Spot
Day Ahead Prices 2012/12/25 in DKK/MWh
Market Coupling! …and Harmonization?
• minimum price DK:
-1500 DKK/MWh (-200 €/MWh)
• minimum price EPEX:
-3000 €/MWh
Must-run capacities curtailment by functioning of the Price Coupling Algorithm
Reason: unharmonized price caps in local markets.
Curtailment of
Danish must-run
capacities
Wind infeed DE in MW
07 May 2013 NAREM-Workshop, Essen 6
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
ins
tall
ed
ca
pa
cit
y i
n M
W
Geothermie/andere reg. Erz. Wasserkraft Biomasse Wind onshore Wind offshore Photovoltaik
Outside the market:
Forecasted RES development in Germany
Currently not/limited influenceable with market mechanisms
NAREM-Workshop, Essen
minimum load approx. 35.000 MW
maximum load approx. 84.000 MW
Sources: BMU, Langfristszenarien und Strategien für den Ausbau Erneuerbarer Energien in Deutschland, 2009
Szenariorahmen B für den Netzentwicklungsplan 2012
7 07 May 2013
The TSO’s dilemma:
The grid is not a copper plate
Redispatch frequency increases:
Nuclear
phase out
Germany
Year Days Redispatch
Actions
2003 2 2
2004 14 15
2005 51 51
2006 105 172
2007 185 387
2008 144 228
2009 156 312
2010 161 290
2011 308 998
2012 344 970
07 May 2013 NAREM-Workshop, Essen 8
Quo vadis energy market? From a market with some regulation to regulation with a bit of market …
• triggered by the “Energiewende”, TenneT as an
unbundled Transmission System Operator has
contracted eight power plants with ca. 2,000 MW
generation capacity and in addition has been
involved in
07 May 2013 9
Are we back to the future of market design?
NAREM-Workshop, Essen
• arranging fuel storage
• structuring gas procurement and gas
contracts
• coordination of power plant revisions,
including financing power plant maintenance
and repairs
Quo vadis energy market?
Patchwork or “Single IEM”
RES Schemes
Capacity Markets
… Remedies to heal adverse
effects of other remedies …
07 May 2013 NAREM-Workshop, Essen 10
Current market design issues …
What “Market” if the market share is decreasing ?
How to attract investments in conventional generation ?
How to grant back-up and reserve for intermittent generation ?
How to incentivize market parties to contribute to Security of Supply in the
operating planning phase ?
How to smooth the problem of grid expansion not keeping pace with changes
in the generation pattern ?
How to align diverging (national) repair actions to save the IEM ?
How to bring back on track various unstable regulated components ?
Now‘s the time to set the course for a post-2014
clean, secure, competitive and European energy
system with a functioning IEM
07 May 2013 NAREM-Workshop, Essen 11
TenneT is Europe´s first cross-border grid
operator for electricity. With approximately
20.000 kilometres of (Extra) High Voltage
lines and 36 million end users in the Netherlands
and Germany we rank among the top five
grid operators in Europe. Our focus is to
develop a north-west European energy
market and to integrate renewable energy.
Taking power further
www.tennet.eu