I-SEM NEMO BLG. 4 th April 2016

Transcription

1 I-SEM NEMO BLG 4 th April

2 Agenda & Terms of Reference NEMO BLG Terms of Reference CACM Obligations NEMO Solution Overview Day-Ahead Solution Overview PCR/MRC Workstream Euphemia Trial Overview Lunch Cross-Border Intraday Project (XBID) Interim Intraday Design Proposal I-SEM NEMO Technical Engagement Discussion/Queries

3 CACM Obligations NEMO BLG, 4 th April

4 Background CACM Entry into Force on 14 July 2015 CACM is relevant Regulation for NEMOs Relevant for DA/ID timeframes NEMO & MCO

5 I-SEM CACM Derogation 2015/1222 CACM Regulation provides for transitional arrangements for I- SEM until 31 December 2017 Except for the following, where the deadlines still apply: Articles 4, 5 & 6 on NEMO Designation Participation in the development of terms, conditions & methodologies, namely: Determination of NEMO voting rights per Member State MCO plan NEMO requirements for DA/ID algorithm Back-up methodology Products for DA/ID coupling Maximum & Minimum prices

6 NEMO Governance under CACM Sets out individual and common NEMO responsibilities Choice for MS of adopting single (monopoly) or competitive NEMO(s) designated by MS or using passport Formal consultation and regulatory approval of methodologies covering such areas as algorithms, products, procedures, price limits Requirement on TSOs and NEMOs to establish day-to-day management Framework for cost sharing and cost recovery NEMO Voting under CACM QMV representing: At least 55% of the Member states/ At least 65% of EU population One vote per Member State/ shared if more than one NEMO NEMO decisions at regional level decided by consensus

7 ACER List of Designated NEMOs Competitive Monopoly NORD POOL NORD POOL NORD POOL EIRGRID SONI APX/ NORD POOL EPEX/ NORD POOL APX/ NORD POOL BELPEX/ NORD POOL EPEX NORD POOL EPEX/ NORD POOL OTE EPEX/ EXAA/ NORD POOL BSP NORD POOL NORD POOL TGE OKTE HUPX OPCOM CROPEX OMIE OMIE GME IBEX LAGIE

8 Stakeholder Consultation CACM Timeline for NEMO Tasks Oct 17 CACM EIF Aug 15 NEMO Designation CER/UR designation Oct 15 Prepare MCO Plan Apr 16 Oct 16 NRA approval I-SEM Go-Live Oct 17 European tasks Prepare DA/ID Methodologies Algorithms* Products Backup procedures* Max/Min prices* Implement MCO Plan (max 12 mths) Feb 17 Aug 17 NRA approval Regional tasks Complementary Regional Auctions Stakeholder Consultation NRA approval Local tasks Multiple NEMOs in Bidding Zone NRA approval * In cooperation with TSOs MCO Plan implementation deadline

9 CACM: European Coordination & NEMOs Market European Stakeholder Committee contribute to monitoring progress in the NCs implementation process serve as a platform to share general views on the NC implementation enable stakeholders to express their views and receive feedback contribute to more informed decision-making process for the methodologies and rules still to be developed for the implementation of the NCs Includes ENTSO-E, ACER, NEMOs and other stakeholder associations CACM Coordination Group Involving TSOs (ENTSO-E) / Regulators (ACER) / NEMOs

10 Questions

11 NEMO Solution Overview NEMO BLG, 4 th April

12 I-SEM NEMO NEMO Time 1 Year FTR & Forwards Market Financial Transmission Rights between zones and Financial Forwards within zone Traders operate across all of these timeframes CRM Market Capacity Remuneration Mechanism EirGrid Group has responsibility for market operations in all timeframes NEMO s operate the DA and ID markets across Europe mostly through PX s EPEX Spot has been selected to provide the service of the PX systems For ID market, XBID will be unavailable for I-SEM go-live. An interim solution is proposed Real Time Day-Ahead Market Intraday Market Balancing & Dispatch Imbalance Settlement EU price coupled dayahead auction supplier & generator bidding Continuous local trading and regional auctions with supplier & generator bidding Mandatory continuous balancing market with INC & DEC pricing Cash out of differences between actual and traded positions N E M O

13 NEMO What is it? Capacity Market FTR Market Day Ahead / Intraday Balancing & Dispatch Operational Planning & Forecasting Common Grid Model Operations I-SEM Key System Functions DAM/IDM Operational Scheduling Balancing & Dispatch NEMO Functions Advise Capacity Quantity Advise FTR Quantity Publish System Information Wider Market Functions CRM Customer Care FTR Customer Care DAM/IDM Customer Care Balancing & Imbalance Customer Care CRM Registration CRM Auction FTR Auction DAM/IDM Trading CRM Settlement Calculation FTR Registration FTR Settlement Calculation DAM/IDM Registration EU Market Coupling DAM/IDM Settlement Calculation CRM Clearing FTR Clearing DAM/IDM Clearing Balancing Market Registration Balancing Market Operations Balancing & Imbalance Settlement Calculation Balancing & Imbalance Clearing NEMO Provides access to European Electricity Market and acts as counter party to trades CRM Market Surveillance FTR Market Surveillance DAM/IDM Market Surveillance Balancing & Imbalance Market Surveillance Aggregator of Last Resort

14 DAM/IDM How it works? Market Participant DAM Bids/Offers by Gate Closure 11am D-1 Anonymised Bids/Offers DAM Results by 12:00 D-1 DAM/IDM Trading Platform Anonymised DAM Auction Results DAM Market Coupling Operator (MCO) Continuous IDM Bids/Offers up to 1 hour prior to delivery hour Anonymised Bids/Offers Continuou s IDM Cleared Trades as soon as matched IDM Shared Order Book Anonymised Individual Match Trades PNs after DAM by 13:30 D-1 TSOs Updates to PNs based on IDM cleared trades up to 1 hour prior to delivery hour Trading Results (DAM/IDM) as available Clearing Member Invoices/ Self Billing Invoices 17:00 on D -1 Collateral/ Criteria for Providing Service Collateral Funds In/Out Payments in/ Payments out on D Central Counter Party (CCP)

15 Systems and Services Programme 15

16 Progress to-date EPEX and European Commodity Clearing (ECC) selected as the service provider to EirGrid and SONI NEMO contract negotiation ongoing Early cooperation agreement signed to commence implementation Interim Intraday market design proposal nearing completion Activity Q Q NEMO Application PX PQQ PX RFP RA Roles Designation PX Contracting Design Build Test Market Trial Go-Live

17 Relationships between parties EirGrid & SONI NEMO Sending of trades Clearing House Trading Direct Clearing Under Review Clearing Member (Bank with ECC Agreement) Settlement Scheduling Settlement Exchange Members Settlement Balance Responsible Agreement TSO ICs IDM solution to be designed

18 Workstreams Technical Solution System Design, Specs Development, Config Testing ECC Clearing Shipping Dual Currency Clearing Members Market Participant Readiness On-boarding Testing Coupling European Regional Local Legal & Regulation Market Rules Contracts Licence Operational Support Services Publications On-call support NEMO Branding Business Modelling and Pricing Liquidity, products List of prices CACM Implementation MCO Plan CACM Obligations European Transparency and REMIT Different requirements for Day-Ahead Market, Interim Intraday Market, and Enduring Intraday ( XBID ) Market

19 Market Rules Development ToRs, Timeline and Development Process Draft DAM Rules Interface Rules Clearing Rules Draft Local Continuous IDM Rules Market Participant and RAs engagement throughout Final RA and Market Participant Engagement Legal draft of NEMO Rules Draft CB IDM Auction Rules

20 Questions When will the Ex-Ante (EA) trading functionality contract be awarded by EirGrid/SONI (NEMO)? Request that further consideration be given to single collateralisation across DA, ID, BM whereby SEMO and NEMO interactions could be aligned to minimise collateral cover exposure insofar as possible When will the collateral arrangements for EA markets be known? Will the NEMO clearing house support collateral netting across multiple DAM and IDM markets e.g. I-SEM and GB? When will the details of the clearing house rules be available to participants? Time needed to put in place arrangements.

21 Day-Ahead Solution Overview NEMO BLG 4 th April

22 I-SEM NEMO NEMO Time 1 Year FTR & Forwards Market Financial Transmission Rights between zones and Financial Forwards within zone Traders operate across all of these timeframes CRM Market Capacity Remuneration Mechanism EirGrid Group has responsibility for market operations in all timeframes NEMO s operate the DA and ID markets across Europe mostly through PX s EPEX Spot has been selected to provide the service of the PX systems For ID market, XBID will be unavailable for I-SEM go-live. An interim solution is proposed Real Time Day-Ahead Market Intraday Market Balancing & Dispatch Imbalance Settlement EU price coupled dayahead auction supplier & generator bidding Continuous local trading and regional auctions with supplier & generator bidding Mandatory continuous balancing market with INC & DEC pricing Cash out of differences between actual and traded positions N E M O

23 Current Cross-Border Arrangements

24 I-SEM DAM Arrangements Participants will submit orders into the Day-Ahead Market via their NEMO trading platform Utilising existing EPEX platform configured to I-SEM requirements Output of Euphemia trial will inform products offered Orders will be anonymised and submitted by NEMOs to the Market Coupling Operator (MCO) of the Price Coupled Region (PCR) Prices will be set based on matched orders in the Euphemia algorithm run by the MCO Fully price coupled across Europe as required by CACM The MCO will send results back to the NEMO Participants will be informed of their traded volumes and prices ECC will carry out the clearing and settlement function Addressing dual currency requirement

25 DA Implementation Programme Design Specifications Implementation Testing PCR/MRC/ISEM tests Deploy to members Member test Clearing On-boarding Procedures Training CR Algorithm simulation PCR/MRC other process Implementation DA regional project (including procedures/shipping) Ops Contracts Prep. Go-live XBID start with access stream, LIPs (decision to join made)

26 Necessary agreements (1/2) Exchange Members Trading Agreement EirGrid & SONI NEMO Balance Responsable Agreement TSO Non-Clearing Agreement Clearing Member Central Bank Agreement Central Bank Exchange member s responsibility

27 Necessary agreements (2/2) Trading Agreement Between exchange member ( Market Participant ) and EirGrid/SONI NEMO Pertains to the relationship in terms of responsibility (trading, behaviour in the market), requirements (technical, training of traders organization) and property (license) Non-Clearing Agreement Between ECC, the clearing member and the exchange member Corresponding NCM agreement with the cooperating clearing member and ECC Each product has to be included in this agreement Balance Responsible Agreement Between the exchange member and EirGrid/SONI TSO At least one for each market area Includes all contractual agreements between the TSO and the grid user regarding the settlement of power imbalances recorded on balance perimeters

28 Access to ECC Overview Membership Types Currently ECC offers two different types of membership in ECC representing two levels of access: Non-Clearing Members (NCM) are trading participants of the exchange sign a trilateral agreement between the Non-Clearing Member, Clearing member and ECC to provide for the necessary infrastructure General Clearing Members (CM) are financial institutions in an EU member state or Switzerland hold either a general clearing license or a direct clearing license provide clearing services to NCM can be trading participants of the exchange ECC plans to introduce a new membership category for clearing at ECC Spot markets for power to comply with requests for an easy access option for SME s. 28

29 Access to ECC Access to ECC Trilateral Relationship between CM NCM ECC Trilateral Relationship between CM NCM ECC Non-Clearing Members (NCM) are trading participants of the exchange that only need to fulfill basic clearing requirements. sign a trilateral agreement between the NCM, Clearing Member (CM) and ECC to provide for the necessary infrastructure. Trilateral Non-Clearing Member Agreement Clearing Member Payment Agent Guarantor NCM Conclude a balance group agreement Find a CM and conclude NCM Agreement Become a trading participant ECC Responsible for contracted quantity submission Performs margining, financial settlement and accounting transactions 29

30 Access to ECC New Direct Clearing Participant Model ECC plans to introduce a new membership category for clearing at ECC Spot markets with adequate limit systems to comply with regulatory requests to introduce an easy access option for SME s. Small Spot only members find it increasingly difficult/expensive to be accepted by CMs. Clearing Member General Clearing Member Direct Clearing Member Direct Clearing Participant Clearing Member

31 Access to ECC New Direct Clearing Participant Model - Summary Allow small and medium sized entities to gain direct access to the Spot markets cleared by ECC Direct clearing access is required to become provider for specific markets such as the permanent EUA auction platform for the European Union or selected power spot markets, e.g. in Belgium An important component to offer a Direct Clearing solution is to accept Guarantees as Collateral in addition to cash Direct Clearing Access is only allowed for markets with a sufficient pre-trade limit system in place. Trading restricted such that exposures will always be below the available collaterals A settlement bank has to provide TARGET2 access and acts as payment agent The introduction of the DCP model is currently scheduled for Q2 / Most functionalities will also be made available for Clearing Members

32 Questions Uncertainty on the influence of REFIT decisions on participation of wind in the Day-Ahead versus Intraday timeframes Implications on prices and liquidity Concern that the disjoin between the activities of the NEMO is collateralised in the DAM/IDM and SEM is collateralised in the BM which will result in over collateralisation Is the NEMO going to require price taking demand to post full volume times price cap? This would result in a large over collateralisation of the DAM. NEMO provisions should use a realistic average price and not prevent trading of clearly collateralised participants.

33 PRC/MRC Workstream NEMO BLG 4 th April

34 Implementation of PCR

35 All NEMO Committee Interim NEMO Cooperation Agreement (INCA) 3 March 2016 Developing MCO Plan Explanation of necessary draft agreements between NEMOs and with third parties Proposed timescale for implementation (not longer than 12 mth) Governance structure All NEMO Cooperation Agreement (to supersede INCA) Day-Ahead Operational Agreement Intraday Operational Agreement Servicing and serviced NEMOs requirements addressed Clarity on roles and responsibilities

36 Contractual Landscape All NEMO Committee (PXs Only) Multi-Regional Coupling (MRC) (Set of TSO/NEMO Agreements) Regional Framework TSOs Interconnectors NEMOs Price Coupling of Regions (PCR) Day-Ahead Market Coupling Operator (MCO) Function Intraday Arrangements XBID NEMO Third Party Services Co-Owner Agreement Co-Oper Agreement

37 Implications for I-SEM NEMOs The Day-Ahead Market will be coupled with the Multi-Regional Coupling (MRC) solution known as Price Coupling of Regions (PCR) This involves parties across Europe who are CACM compliant in the DAM I-SEM parties must sign-up to and adhere to the Day-Ahead Operating Agreement and its associated procedures and obligations E.g. in the case of fall-back decoupling, we will have the ability to run a second Euphemia session to handle matching of CWE-GB-I-SEM areas We will need to submit a Change Request to the PCR to incorporate the needs of the I-SEM We will need to work together with the PCR Committee to test and approve the solution for I-SEM (i.e. we can not dictate the solution)

38 Questions

39 EUPHEMIA Trial Overview NEMO BLG, 4 th April

40 Background- EUPHEMIA Algorithm EUPHEMIA is the European day-ahead market (DAM) algorithm: In use by power exchanges (PXs) throughout Europe Performs daily market auctions for the DAM Provides daily prices, schedules and interconnector results Has evolved from previous market algorithms: Previously, PXs each had individual market algorithms Functionality was combined to form a single solution Functionality based on markets of founding PXs

41 Background- EUPHEMIA Process Takes inputs from all markets: Offers Bids I/C Values Bid and offer data (orders) Interconnector values Participants submit data locally: PXs submit full set of orders centrally MCO runs EUPHEMIA for all markets 11:00* DAM gate closure 11:42 Results made available** 11:55 Final results confirmed** *Times in GMT **Assuming de-coupling is not required

42 Background- EUPHEMIA Bids/Offers Hourly orders submitted by generators and suppliers Orders are anonymised before being sent to EUPHEMIA No link in algorithm between order and unit Orders do not need to be asset-backed Numerous implementations throughout Europe: The bid and offer products (order types) offered differ for each PX Order types available determine how participants can use the market Order types affect risks and mitigation measures available

43 EUPHEMIA - Interconnectors Values as in the SEM: Individual ATC, Ramping and Losses Interconnector scheduled based on price spread Differing losses result in bands of activity as price spread increases Both Flowing Moyle Flowing EWIC Not Flowing Neither Flowing EWIC Loss % Moyle Loss % Price Spread

44 EUPHEMIA SEM MSP EUPHEMIA Markets.vs. SEM Portfolio/Unit based Limited products Physical forwards used Commercial risks Supplementary market context Unit based Specific products No physical forwards Cost guarantees Single market

45 Background - EUPHEMIA Trial Goal is to assess the possible implementations: Can SEM characteristics be represented in EUPHEMIA? If so, what order types should be used to do this? Trial of EUPHEMIA using SEM data: SEM data converted to EUPHEMIA orders EUPHEMIA schedules analysed Trial will feed into the decision making process: Inform decisions during detailed design and implementation Provide insight into decision implications

46 Background - EUPHEMIA Trial Process Define Assumptions Review Assumptions Create Data Analyse Results Execute Data SEMO SEMO & Industry APX

47 EUPHEMIA - Order Types Trialed to date Simple Orders Complex Linked Block Exclusive Group PQ pairs with no conditions attached Orders aggregated into hourly curve Price-quantity pairs with conditions Explicit representation of TOD and COD Interdependent blocks of energy Block price implicitly accounts for costs Group of mutually exclusive profiles Block price implicitly accounts for costs

48 Emerging Results & Conclusions No current preferred implementation option: Recommendation will be produced at the end of trial Will include order types to be used May be a combination of order types Implications must be understood before recommendation Areas for focus identified: Preference for linked block and complex order for thermals Simple orders used for a wide range of participants Final trials will provide additional clarity on the order types

49 Emerging Results & Conclusions Risk vital element of design of I-SEM DAM: SEM style guaranteed costs not possible in EUPHEMIA Risks can be managed through informed use of orders Risk mitigations are based on order types available Unclear on liquidity in DAM and other timeframes: Not clear on how wind and load will be incentivised Demand bid prices have significant effect on DAM clearing DAM liquidity has knock-on effects to other timeframes

50 Disclaimer The information contained herein including without limitation any data in relation to Euphemia test results (the Information ) is provided as is and no representation or warranty of any kind, express or implied, is made in relation to the Information and all such representations or warranties, express or implied, in relation to the Information are hereby excluded to the fullest extent permitted by law. No responsibility, liability or duty of care to you or to any other person in respect of the Information is accepted, and any reliance you or any other person places on the Information is therefore strictly at your own or their own risk. In no event will liability be accepted for any loss or damage including, without limitation, indirect or consequential loss or damage, arising out of or in connection with the use of the Information. By using or relying on the Information, you automatically consent to the terms and conditions of this disclaimer. In the event that the Information is provided by you, in whole or in part, to a third party for whatever reason you shall ensure that this disclaimer is included with the Information and brought to the attention of the third party. Copyright All rights reserved. APX Power B.V., EirGrid plc and SONI Ltd.

51 Questions & Lunch

52 Cross Border Intraday (XBID) Enduring Solution NEMO BLG, 4 th April

53 CACM Guideline CACM: a common cross border implicit continuous Intraday trading solution across Europe, where all the cross border capacities are allocated Task description (55.3) by 24M after the entry into force all TSOs shall develop a proposal for a single methodology for pricing intraday cross-zonal capacity Specific Intraday Capacity Pricing Requirements (55.1 & 55.4) shall reflect market congestion and shall be based on actual orders No charges, such as imbalance fees or additional fees, shall be applied Other ID requirements: the CT algorithm shall (a) aim to maximise economic surplus; (e) be repeatable and scalable. discrimination shall be avoided when simultaneously allocating capacity implicitly and explicitly

54 CACM Guideline Other general requirements: ID capacity to be allocated implicitly Non discriminatory access to capacity Promotion of fair and orderly market and price formation Promoting effective competition in generation, trading, and supply of electricity Ensuring optimal use of the transmission infrastructure Additional relevant provisions: Complementary regional auctions (where deemed necessary) Explicit access to Intraday capacity (where allowed as an interim option)

55 What is XBID? OMIE APX/ Belpex XBID EPEX SPOT TSOs from 12 countries Austria Great Britain GME Belgium Denmark Luxembourg Norway Nord Pool Finland France Sweden Switzerland Germany The Netherlands

56 Terms Used in XBID Delivery Area 1 Market Area Delivery Area 2 Delivery Area n Interconnector A connection between 2 Delivery Areas Border A connection between 2 Market Areas Product Contract Trading Schedule Contract 1 Contract 2 Contract n Product

57 XBID System Components Enriched dataset SOB SM SOB SOB SM SM SOB SM CMM SOB: Shared Order Book CMM: Capacity Management Module SM: Shipping Module

58 Market Participants position within the XBID and TS solution Member X PX local order book Area A PX local order book Area B Member Y Shared Order Book (SOB) Capacity Management Module (CMM) TSO A TSO B TSO n

59 XBID Order Types Order type Execution Restrictions Validity Restrictions Predefined User- Defined Regular predefined Regular userdefined block NON (None) IOC (Immediateor-Cancel) FOK (Fill-or-Kill) AON (All-or- Nothing) GTD (Good Till Date) GFS (Good For Session) GTD (Good Till Date) GFS (Good For Session) Iceberg NON (None) GTD (Good Till Date) GFS (Good For Session) Linked Basket FOK (Fill-or-Kill) -- Yes No Yes No Yes No Yes No

60 XBID Solution XBID Common Project LIPs* XBID Project Approach Set-up of LIPs (appoint PM, project structure, budget, PID) Alignment XBID/LIP planning (Testing and Go-live Phase) Adjustment local systems, interface / test environment implementation Testing and Golive preparations Governance and reporting structure Roadmap Progress Reporting Testing Reporting Go-Live readiness Common framework for pre- and postcoupling Follow-up/coordinate implementation of Interim Solution Coordinate Design and Development of Interim Solution (monitoring and directing) D&D contract Business Blueprint XBID Interim Solution delivered and accepted Project under ESA Project under contract (Development) Project under contract (Testing) Current position of project = Completed

61 Local Implementation Projects (LIPs) TSOs & PXs participating for developing and implementing the XBID solution PXs participating; REE observer PXs participating, adherence to joint project ongoing

62 Generic LIP Plan

63 Timelines Q Q Q Q Q Q Q I-SEM Go-Live XBID Go-Live ID Interim Solution XBID Accession Stream end date unknown Capacity Pricing Proposal Aug 17 NRA Approval Implementation - TBD

64 ENTSO-e Proposed Hybrid Model * Currently known mechanism to price capacity during CT sessions depend on time, remaining capacity within a certain trading period, or probability of congestions (see reports from PMI and Baringa for Ofgem study ) Neither continuous trading nor implicit auctions can fulfil alone all CACM requirements. Recommendation is to develop Hybrid Models which includes both Implicit Auctions and Continuous Trading sessions

65 Hybrid model 1: DRAFT Overview D h (ID)A1 D-1 (PCR) 18.00h (ID)A1 D+1 (PCR) A1 Tradeable hours 00:00-24:00 D A3 Tradeable hours 16:00 24:00 D 24:00h 16:00-24:00h D CT session 3 D-1 (XBID) 00:00-08:00h D CT session 1 (XBID) 08:00-16:00h D CT session 2 (XBID) * Timings, number of auctions, and GCTs are indicative. 16:00-24:00h D CT session 3 (XBID) To be reviewed based on PXs and market parties feedback, possible regional specificities

66 Hybrid model 2: DRAFT Overview D-1 18:00h (ID)A1 (PCR) 18.00h (ID)A1 D+1 (PCR) A1 Tradeable hours :00 24:00h 00:00h 16:00-24:00h D CT session 3 D-1 (XBID) 00:00-08:00h D CT session 1 (XBID) 08:00-16:00h D CT session 2 (XBID) * Timings, number of auctions, and GCTs are indicative. 16:00-24:00h D CT session 3 (XBID) To be reviewed based on PXs and market parties feedback, possible regional specificities

67 Implications for I-SEM XBID not available for I-SEM Go-Live Interim solution required Local Implementation Plan to commence in parallel with I-SEM Project Regional and cross-border auctions Influenced by hybrid options Working to align as much as possible Engaging with XBID to appropriate level

68 Questions? Previous questions from stakeholders: I-SEM project milestone 55 XBID Go/No Go decision in Dec What was the decision. What is the status of XBID in general? What is the status of a local implementation project for I-SEM?

69 Interim Intraday Design Proposal NEMO BLG, 4 th April

70 I-SEM Interim Intraday Proposal NEMO Time 1 Year FTR & Forwards Market Financial Transmission Rights between zones and Financial Forwards within zone Traders operate across all of these timeframes CRM Market Capacity Remuneration Mechanism EirGrid Group has responsibility for market operations in all timeframes NEMO s operate the DA and ID markets across Europe mostly through PX s EPEX Spot has been selected to provide the service of the PX systems For ID market, XBID will be unavailable for I-SEM go-live. An interim solution is proposed Real Time Day-Ahead Market Intraday Market Balancing & Dispatch Imbalance Settlement EU price coupled dayahead auction supplier & generator bidding Continuous local trading and regional auctions with supplier & generator bidding Mandatory continuous balancing market with INC & DEC pricing Cash out of differences between actual and traded positions N E M O

71 Driver for Interim Intraday Solution XBID project is not available for I-SEM go-live A programme of work is required to deliver CACM compliance An interim intraday solution must provide sufficient liquidity for market participants to establish balance responsible positions EMIP programme is challenging and quick action is necessary Proposal to Regulatory Authorities for the interim intraday solution to be developed by EirGrid/SONI

72 Stakeholders Engagement Market Participants EirGrid / SONI NEMOs EPEX/ECC as service provider GB PX and GB Clearing House EirGrid / SONI / NGET as TSOs EirGrid Interconnector Limited Owned by EirGrid, connected in Britain & Ireland Moyle Interconnector Limited Owned by Mutual Energy, connected in Britain & Northern Ireland Regulatory Authorities (UREGNI, CER, Ofgem) 72

73 XBID Objectives and Evaluation Criteria CACM Compliance Implicit Continuous Pricing based on orders Prices reflecting market congestion Maximisation of economic surplus Ease of Implementation Simplicity Practical and feasible Cost-efficiency Reasonable time to market Efficient Capacity Pricing Fair and transparent price formation, no distortions Liquidity Assigns capacity to whom values the most Optimises use of available ID capacity Robust and future-proof High performance and reliability Scalable Durability / forward looking / consistent with XBID evolution Consistency with all market timeframes and NC/GLs Efficient governance Fulfilment of MPs needs Capacity not priced if not scarce Possibility to adjust positions close to real time Pricing known at the time of matching Ease of use Transparency and Predictability Level playing field Accessibility for ALL market participants (small generators, RES, demand side, conventional, etc.) Prevention of gaming and market power Fairness

74 Market Participant Feedback (Summary) 4 responses requested cross-border continuous trading ASAP All responses agreed with the use of local continuous trading Some noted that it may not provide sufficient liquidity in I-SEM All responses were in favour of cross-border implicit auctions not explicit Minimum of two 3 suggested the auction timing be linked to wind and demand forecasts 1 concerned both auctions and continuous may dilute liquidity Most responses in favour of additional local auctions 3 noted that more auctions (3 or 4) would be beneficial All requested trading granularity at ½hr to match the Balancing Market Continuous products similar to current arrangements in GB

75 Market Participant Feedback (1) Main concern given I-SEM ETA (balance responsibility and administered scarcity pricing) & CRM (ROs) is provision of a liquid ID market for I-SEM. Arrangements should be designed to support liquidity The ID solution should allow participants the opportunity to trade at the settlement period granularity to facilitate shape management and therefore their imbalance exposure. Intra-day solution is being designed for 30 mins settlement periods Facilitation of a 15 mins settlement granularity would be a challenge for the balancing and settlement solution and is not part of baseline Combined with liquidity concerns, a higher frequency of auctions would augment market access provided through the continuous trading.

76 Market Participant Feedback (2) Treatment of interconnectors must promote trading in the ID market, and ensure no barriers to trade in the ID market. Traders will be indifferent to what IC they are trading across and physical scheduling of flows will occur in the background. Careful consideration to be given to treatment of losses, etc. ID cross-border implicit auctions are widely supported as they will help pool liquidity.but considered insufficient on their own to support participant trading needs in the intraday timeframe. Development of a continuous trading solution is therefore required to ensure adequate market access under I-SEM arrangements.

77 Market Participant Feedback (3) Participants will need to manage potentially large variations in imbalance positions: due to variations in wind generation; or to manage forced outages; or to manage potential scarcity events (close retail positions / get generators scheduled); or following ID auctions generators may need to trade themselves into a technically feasible position; or following ID auctions suppliers may want to trade out their residual shape via continuous trading. Participants need a screen where they can post bids and offers similar to the OTC format or APX ID market in GB.

78 Market Participant Feedback (4) Implementation of continuous trading will help make the market transition to LIP and XBID more straightforward. Concerned at possibility that continuous intraday trading could be descoped for I-SEM go live. Implementation of continuous trading should be achievable given that the I-SEM NEMO service provider has implemented similar local continuous intraday functionality in other EU markets i.e. may have an off-the-shelf solution. Issues for dual currency does represent a challenge here but this can be overcome Recommend higher frequency of ID auctions aligned with publication of updated TSO forecast information. Up to 4 depending on TSO information availability and updates

79 Market Participant Feedback (5) It would be useful if publication of demand and wind forecast could be coordinated and participants could be given sufficient time (up to an hour) to re-assess positions prior to the auction. Appreciate constraint in relation to GB PXs and market participants to support a higher frequency of regional auctions, but it would be worthwhile considering a greater number of auctions even if some of them are restricted to the I-SEM region only. Splitting of liquidity is a concern for the GB PXs Note, variability on SEM imbalance positions due to wind forecast changes will be proportionally substantially greater than in GB and therefore we require more flexibility on IDM trading set up.

80 Market Participant Feedback (6) Information on products for continuous ID and auctions requested Assume continuous ID to support similar products to GB, at settlement period granularity but also longer duration blocks, e.g. 1, 2, 4 hr blocks For auctions, what is being considered? Will it be based on the current GB auction approach? As market participants are required to be balance responsible, the IDM must be liquid For wind, expect 10% imbalance exposure between DAM and IDM Regulatory intervention to facilitate this..as per Ofgem Secure and Promote initiative in 2011 to handle liquidity issues for GB market Concerned about risk of volatile imbalance prices

81 Market Participant Feedback (7) Are order formats for continuous trading and ID auctions (which needs to also consider clearing and price formation approaches) being considered in conjunction with current imbalance pricing arrangements? Careful not to introduce a systemic difference in pricing between intraday markets and the balancing market as could distort incentives to trade in IDM In relation to recovery of fixed costs, participants will want to recover start costs in the imbalance pricing Could participants in NI see all prices on the continuous IDM platform in Sterling and all participants in ROI see all prices of same in Euro? With the FX Rate set daily?

82 Current SEM Arrangements SEM Intraday Market Gates Ex Ante Gate Closure 1: 09:30 Ex Ante Gate Closure 2: 11:30 Within Day Gate Closure 3: 08:00 Trading Day-1 Trading Day 06:00 06:00 18:00 06:00 MW Schedule to EirGrid NCC

83 Current Cross-Border Arrangements

84 Interim Approaches Considered Two implicit cross-border intraday auctions with local continuous More than two cross-border intraday auctions with local continuous Local auctions (in addition to one cross-border implicit intraday) Local auctions with local continuous if no GB acceptance of CB soln. Auctions only i.e. postpone or exclude continuous intraday local trading Note: Continuous cross-border trading is not feasible for go-live To be developed as part of the XBID LIP

85 Interim Intraday Arrangements Proposal Cross-border intraday Go-Live CB Auctions Local Continuous Regional Continuous Notes I-SEM 2017 Yes Yes No LIP for XBID 2018/2019 At least two Implicit Auctions based on half hourly products IDM Auction 1 48 ½hr periods with auction at 15:30 D-1 IDM Auction 2 24 ½hr periods with auction held in the morning of D Local intraday (i.e. not cross-border) Continuous trading on half hourly trading periods; and Additional local auctions (where appropriate/required) Yes Fall Back Yes XBID+ 2020? Yes Fall Back XBID+ If no local continuous available, consideration of number of auctions and the need for a larger PAR* is required. To join XBID we must first couple through a Local Implementation Project (LIP). Parallel work is required during I-SEM delivery in the XBID Accession Stream to achieve go-live. Consideration of auctions as a long term solution in addition to continuous trading within Europe currently ongoing * PAR is the cost of the last X MW of balancing delivered.

86 Interim Intraday Arrangements Proposal I-SEM Intraday Market Gates DAM Auction 1 Gate Closure: 11:00 Trading Day-1 IDM Auction 1 Gate Closure: 15:30 Trading Day IDM Auction 2 timing can be flexible (e.g. 07:00 to 09:00) IDM Auction 2 Gate Closure: 08:30 23:00 23:00 11:00 DAM Volumes 23:00 MW Schedules Continuous matching locally (and local auctions where appropriate) 13:30 IDM Auction 1 IDM Auction 2 Continuous Local Intraday

87 Benefits of Proposed Solution Access to implicit cross-border intraday auctions capacity between I-SEM and GB Assume we will initially contract with APX in GB for cross-border arrangements as APX currently manages all IDM volumes Continuous trading locally using similar arrangements to GB, participants can: Coordinate adjustment of commercial positions from previous auctions Run and plan power generation closer to delivery Manage unforeseen events such as power outages Introduction of continuous local trading will facilitate moving to XBID LIP

88 Why is this better than today? Prices are set at point of trade more certainty Cross border arrangements are firm less risk Capacity and power sold in one single transaction and participants are not exposed to interconnector outages Optimal use of the interconnectors more efficiency Local continuous trading locally (and local auctions) participants can Coordinate adjustment of commercial positions from previous auctions Run and plan power generation closer to delivery Manage unforeseen events such as power outages Implement similar in-house trading arrangements to those used in GB or elsewhere Greater level of compliance with CACM Guideline Local continuous provides a pathway to Local Implementation Project and XBID Continuous trading locally requires less NEMO operational resources to manage compared to more CB auctions

89 Limitations The local continuous market would not provide cross-border access Third party trading services may be required for priority dispatch cross-border after any cross-border intraday auctions if number of auctions is low An alternative such as the BritNed approach is suggested by EPEX explicit auctions intraday then participants nominate into intraday markets XBID and Local Implementation Project (LIP) objectives may not be met if there are no implicit cross-border auctions or continuous cross-border PXs in GB will have to agree on approach to implementation of crossborder order book sharing mechanisms Currently only one intraday auction at 15:30 APX market share is 100% of intraday capacity.concern about liquidity splitting

90 Decision Influenced by: Implementation timeframe and complexity Liquidity and market access SEM and GB market participant acceptance of solution Market participant implementation complexity For those only in the SEM currently For those already engaged in European cross-border trading Facilitation of balance responsibility actions in the intraday timeframe System security i.e. balancing market interactions Alignment with CACM XBID and Local Implementation Plan XBID Accession stream considerations Facilitation of Renewables e.g. priority dispatch Operating costs and ongoing running of the market (both in SEM and GB)

91 Questions

92 Technical Engagement NEMO BLG, 4 th April

93 EirGrid/SONI I-SEM Solutions Overview Note: There are many other data flows associated with these entities, this diagram provides a high level view

94 Registration Overview - Planned Market Participant 1 Registration Application 2 SEM Registration Function CRM NEMO 3a BAL/IMBAL 4 Clearing Member (Bank with ECC agreement) Trading System Set 3b Trading Platform Initial Application as Non-Clearing Member 3c Clearing House 4

95 Registration Process 1 MP negotiates clearing member agreement with clearing bank 2 Send in I-SEM registration for all relevant markets (CRM/BAL as well as EirGrid/SONI NEMO) 3a I-SEM registration processes application for EirGrid/SONI NEMO, as well as other markets 3b I-SEM registration organises setup for trading with trading platform 3c I-SEM registration initial vetting and sent on application for clearing house to process 4a & 4b Market Participant liaise directly with clearing house and clearing member to complete tri-lateral clearing or direct clearing agreements 95

96 Gate Closure for Balancing Market

97 Interconnector PNs Differences between what PNs represent and how they are determined: Market Participant Interconnector Market Involvement Active. Passive. Market Results Represent Commercial position. Flow results from algorithm. PN Calculation Agent Self. TSO. PN Calculation Timing Any time before or after ex-ante trade. Automated process after receipt of ex-ante flow results. PN Represents Link to Ex-Ante Market Results Minute-by-minute profile of intended running in absence of TSO action. Physically feasible. At gate closure. Soft link (settlement, market monitoring). Minute-by-minute profile of interconnector running due to market results. Physically feasible. At all times, latest results. Hard link (system calculations). Passive interconnector PNs must reflect latest market results at all times; PNs must be calculated after gate closure to reflect final market results because receipt of these results is after gate closure.

98 Interconnector PNs (example) If IDM trades allowed up to Gate Closure, need to allow time for IC flow results to be processed into FPN for any last-minute trades, example: Gate Closure IDM Trade Activity Market Participant Ex-Ante Commercial Position Market Participant PN/FPN Can update PN before trade Interconnector Ex-Ante Flow Interconnector PN/FPN Can only update PN after trade Process Time Process Time

99 Interfaces, Reports, Connectivity The Market Participant Update Document (MPUD) contains functional and technical information related to interfaces, reports, and connectivity. Release Planned Rel. Date MPUD 1 June 2016 Focus Balancing Market: interfaces, connectivity requirements (type 2/3) AOLR: interfaces, connectivity requirements (type 2) MPUD 2 Sep 2016 MPUD 3 Dec 2016 DA/ID Market: interfaces, connectivity requirements (type 2/3), Balancing Market: reports; AOLR: reports Balancing Market: participant interface toolkit DA/ID: reports FTR: reports, interfaces, connectivity requirements (type 2/3) Information in preparation for Connectivity (CCQT) testing CRM: interfaces, reports, connectivity requirements (type 2/3) MPUD 4 Mar 2017 Information in preparation for Market Trial MPUD 5 June 2017 Information in preparation for Go-Live

100 Questions