Intraday CWE. Bernard Malfliet Convenor CWE-TSO-work group

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Franklin O’Connor’
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1 Intraday CWE Bernard Malfliet Convenor CWE-TSO-work group 1

2 Main criteria for the Target Model choice (European and CWE Model) Ease of use of the solution Accessibility for all market parties Visibility / tradability of all offers European wide Complexity and number of systems: user-friendly and single screen Transparent for the market parties Efficiency in solving the balance of market parties (hedging risk) Reduce the balancing needs of BRPs Portfolio optimisation Ability to trade until close to real time (preferably H-1 for delivery H) Flexibility of trading Fast matching (i.e. 30 sec) Trading horizon until the end of the rolling D+1 (starting from the first intraday trade) Maximisation of social welfare Efficient utilisation of cross border capacity Market based allocation of additional intraday capacity Implicit maximisation of social welfare by facilitating trades 2

3 Target model options analysed for implicit allocation of cross-border capacity Two main options Implicit auctions at specific moments in time Continuous trading with implicit capacity access Both models have their drawback compared to the main criteria Implicit Auctions: low score on the efficiency criteria (low speed and low flexibility of the solution) Furthermore, traders see no practical advantage to introduce periodic auctions into regional intradaytrading Implicit continuous trading : low score on the maximisation of social welfare criteria, and market-based allocation of capacity as a result of a significant market event Target model aims at minimising the drawbacks Target Model on CWE level: chosen direction (see details on next slide) Regional implicit continuous allocation of cross-border capacity (continuous trading) Capacity should be allocated market based when significant additional capacity becomes available 3

4 Key Principles for Intraday trading agreed by the WG Should be open as close to real-time as possible Identified constraints: Time needed by TSOs to assess system security for cross border Design must be compatible with system security Implicit allocation of cross-border capacity (see details in next slides) One Capacity Management Module (CMM) Organised by the TSOs Should be able to handle ATC based and flow based methods Regulators have asked TSOs to develop a regional cross-border capacity platform which in principle allows access to capacity for single or multilateral order books (appropriate interface) CWE-wide shared order books (illustration in next slide) Preference for integrating all liquidity for CWE Intraday Collaboration between CWE exchanges to allow their respective intraday liquidity to match between them, irrespective of the exchange it was submitted to, but taking into account the available cross-border intraday capacity 4

5 Key Principles for Intraday trading agreed by the WG Focus on Shared Order Books PX order book Capacity matrix Shared order book mechanism 5

6 Features for Intraday trading (1/2) Market based allocation of capacity 6 General acceptance to include market based matching to accommodate significant new capacity (based on social welfare grounds) Capacity should be allocated to the highest welfare gains At any time additional capacity becomes available previously unmatched bids can be cleared In the short term it will be only at the start of cross-border Intraday that the unused day-ahead capacity might become available Implicitly, this allows a price for the capacity to be determined and a congestion revenue Additional capacity should be announced in advance to allow the market parties to prepare and adapt the bidding The mechanism should be transparent for the market (integrated into the continuous trading mechanism) The principle is still subject to a proof of concept by power exchanges

7 Capacity Price discovery euro Additional capa offer NL-DE curves matching FR-BE curves Congestion revenue offer demand Open questions under investigation (not necessary to be solved today) What happens with the net value between bids and offers? Do TSOs collect the Congestion revenue or give it back to the accepted bids? Pay-as-bid or pay-as-cleared? demand Capacity price? MW Compatibility with continuous trading model? 7

8 Features for Intraday trading (2/2) Capacity allocation has to be an implicit mechanism: consequences on OTC deals No explicit access to capacity for OTC deals OTC deals should be published and executed through the transaction system like any other deal Create the platform for commodity trading on Intraday Target model platform should allow sophisticated products (block bids) With additional block bid possibilities for specific intraday needs Include block bids taking into account startup costs Aim is to cover OTC needs via the platform Firmness It is agreed that when a deal is closed on the platform (and nominated), the deal and the capacity used by the deal is firm, except in case of Force Majeure. Thus the capacity in the intraday domain is financially firm once the trade is cleared and capacity is allocated and nominated. 8

9 Validation of the Orientation Study Orientation Study as prepared by the Intraday WG Document still be editorially finalised in the coming days (mainly some more summary of input) Main messages from the document 9 The model is implicit continuous trading Shared order mechanism : PX share information + central automatic matching Centralised TSO capacity management module Not specific access for OTC Sophisticated block bids to be offered on intraday (to cater the need of market parties otherwise covered by OTC) Automatic match of orders in case of additional capacity (and at start of crossborder intraday) Pay-as-bid or pay-as-cleared or other alternatives to be investigated No need to harmonise Gate opening time (possible common time would be 18:00) No need to harmonise Gate closure time (possible common time is t -1 hour) Shipping of cross-border deals : to be performed by the PXs / CCPs Firmness of capacity : identical to day-ahead Interim solutions possible on each border

10 Validation of the Orientation Study Network Model 1. Use of residual capacity after day-ahead 2. Simplified constant PTDF matric (4x4) to adapt all capacity in coordinated way after each deal 3. Flow based intraday mechanism : review the flows after each deal Final step is the coordinated, harmonised and centralised capacity management Governance In analogy to the CWE MC TSO preliminary study Discussion to be continued at the start of design phase. 10

Possible market model for crossborder intraday trading

Possible market model for crossborder intraday trading Belpex Users Group 29 January 2008 Linking partners in power Context Intraday trading is becoming increasingly important Within CWE region several