The Nordic Market Model 10 Years of Experience

Transcription

1 The Nordic Market Model 10 Years of Experience 7 th International Workshop on Electric Power Control Centers Ortisei, Italy May 25-28, 2003 Presentation by Ole Gjerde Senior Adviser, Statnett SF 1

2 Contents of presentation Background the Nordic electricity system The Nordic model A competitive market basic requirements From theory to practice Why is the Nordic market a success? Conclusions 2

3 Liberalisation in the Nordic Electricity Market Rapid electricity market opening in the 1990 s. NORWAY Energy Act, Jan 1991 Full market opening 1992 Power Exchange 1993 Nord Pool Norway-Sweden 1996 FINLAND Electricity Market Act, June/Nov 1995 Full market opening 1998 Part of Nord Pool area 1998 SWEDEN Electricity Market Act, Jan 1996 Full market opening 1999 Nord Pool Sweden-Norway 1996 DENMARK Electricity Act, 1998 Energy act amandment, June 1999 > 1 GWh end-users and all distribution companies eligible Full market opening Jan 2003 Nord Pool West Denmark 1999, East Denmark

4 Current Nordic Electricity Situation National legislation, regulatory bodies and TSOs The Nordic electricity market is transformed from four national/five systems into one electricity market Common electricity exchange and reference prices Grid interconnections and trade between countries and to continental Europe DK NL PL APX EEX PPX D EST LT RUS LV 1560 BY RUS Capacity MW Consumption 397 TWh Peak load MW Inhabitants 24 mill. Area km 2 Generation mix Hydro (55%) Nuclear (22%) Thermal (21%) Renewable (2%) 4

5 Nordic Transmission Capasities (MW) 2003 Existing capacity Under construction Planned ENGLAND 1200 NETHERLAND / / ESTLINK

6 THE NORDIC MODEL PRODUCERS OTHER PLAYERS CONSUMERS BILATERIAL ELECTRICITY TRADE PRODUCERS OTHER PLAYERS CONSUMERS ELECTRICITY EXCHANGE Financial market ELSPOT ELBAS Regulating power Balancing power 3 year - 56 h h 33-1 h Operating hour After the fact 6

7 The Nordic Power Market OTC Markets Large-scale industries Generators & Grid owners Trade & clearing representatives Retailers Bilateral Wholesale Market Financial Contracts Physical Contracts (tailor-made or standardized) Nord Pool ASA Spot Market Financial Market: Futures, Forwards, Options (standardized) Large-scale industries Generators & Grid owners Trade & clearing representatives Retailers Retail Market Small-scale industry Commercial and service businesses Households 7

8 The roles of... Nord Pool, market players, and system operators Power Exchange System Operator Organisation and Operation -Financial markets -Elspot -Elbas Grid Capacities Spot trading Operational reliability Ancillary Services Regulating Power Market Balance control and settlement Bids to Elspot and Elbasmarkets Market players Generators Distributors Grid Owners Traders Brokers Large-scale Industries Requesting up- and downward regulation Generation Schedules Bids to the Regulating Power Market 8

9 Nordic physical market Setting the system price Constraints - Defined by TSO - Exchange informed Market opens - Participant information sent Bids - Participant place bids via internet (or EDIEL, fax) Volume in MWh Purchase System price Sale System price Aggregated demand curve Aggregated supply curve Intersection defines system price Price in NOK 9

10 The Regulating Power Market Common information system (NOIS) Bids for upward and downward Common Local TSOs regulation Nordic treat bids merit order list list Market players with regulating resources Norwegian and Swedish TSOs maintain the frequency 50 hz Bids activated Consumption Production Local TSOs pass bids on Ordering upward or or downward regulation 10

11 New Structure after Liberalisation Competition encouraged where possible (electric power a commodity) Natural monopolies (network) separated from competitive operations Open access in all networks Network monopolies regulated by the authorities Trading on the Power Exchange is not mandatory 11

12 The main parties in developing a framework for a common power market The parliaments (EU-Commission) The national regulators The Transmission System Operators (TSOs) 12

13 The TSOs mission includes Facilitate market efficiency Open access to the network for all market players Support establishment of power exchanges Operate a reliable power system Cost reflective sevices 13

14 Access to the network The network is the physical market place All eligible customers must have open access to the network Transmission tariffs based on G and L element (non transaction based tariffs) Congestion management for physical power flow Cross border transmission tariffs (inter-tso transit payment) 14

15 An independent TSO is the backbone of an open market 15

16 Forming of a Nordic Electricity Market Requirements: Co-operation between all five Nordic TSOs on issues required to form one common market. Co-operation regulated in: The Inter-Nordic Transmission System Operation Agreement Elkraft System Statnett Eltra Fingrid Svenska Kraftnät Inter-Nordic Transmission System Operation Agreement 16

17 A competitive electricity market - basic requirements Market rules that do not interfere with system operator s responsibility regarding power quality and reliability Unbundling of monopoly tasks and tasks exposed to competition A transmission tariff structure where charges are non-dependent of choice of trade counter part Access to transmission capacity on non-discriminatory basis A system to manage imbalances A system to manage energy losses in the grid A neutral TSO 17

18 Nordic Electricity Market Structure - Summary Spot market sets energy price Point tariff pays network costs No transmission channels Decentralized generation scheduling Regulating power market for real time balancing of generation and demand Ancillary services by contract Full retail choice of supplier Financial contracts for price hedging 18

19 Market prices in the Nordic Electricity Market NOK/MWh Norways last political decided price Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Desc Source: Nord Pool 1 NOK = 8.00 Euro ( ) 19

20 160 Nord Pool and EXX Price August 1, March 17, USD/MWh European Energy Exchange, Germany Nord Pool System Price 20

21 Area prices at Nord Pool NOK/MWh Stockholm Oslo Odense Helsinki

22 From Theory to Practice - Nordic experience Political willingness / political consensus Legal framework adjusted to ensure competition Independent TSO facilitating competition Positive experiences Regulator and TSO responsible for market development Extensive experience with power exchange Supply industry structure Simple solutions -understandable for participants Be true to the facts, - electricity is a commodity Socio-economic criteria for grid investment Improvement potential Mechanism for securing new generation capacity investments Investment incentives (general problem) 22

23 From Theory to Practice - Key Success Factors Energy act Establish legal framework for securing competitive market and attracting private capital Unbundling Separation of generation / retail from monopoly business (main grid and distribution) Functional competitive sector Regulation TSO operation Establish regulator Regulation of natural monopolies Pricing of transmission and distribution services Secure open access to all grids Transmission tariffs Tools for system balancing Future development of grid 23

24 rranging for a Competitive Environment - Nordic experience TSO as a facilitator for the market Link up between TSOs and power exchange Positive experiences Increased efficiency - economic focus Flexible power flow (national and between Nordic control areas) Better utilisation of grid Simple rules and by-laws Improvement potential Further development in co-operation between Nordic TSOs - harmonisation and common investments Market based linking towards Europe Investment incentives Efficient market for capacity 24

25 Furnishing the Market - Nordic experience Spot trading as a tool for balancing the system Price transparency and liquid market leading to a trusted reference price Positive experiences Competition also among market places Financial market for price hedging purposes Spot market as instrument for integration of Nordic control areas Power exchange as centralised information source for market participants Establishment of retail market The spot market as an instrument for congestion management Improvement potential Harmonization of the Nordic market Linking the Nordic market to neighbouring markets 25

26 Why choose a TSO-solution Snapshot Long-term changes in production- and consumption patterns create a need for transmission capacity adaptations Time Grid development in a socioeconomic perspective is not needed System operator Grid owner An ISO lacks necessary instruments to make grid capacity adaptations A grid owner without system-operator responsibility will often lack incentives to choose instruments that the ISO finds socioeconomic efficient Systemoperator Grid owner TSO-solution is necessary in order to ensure an efficient adaptation of the grid to long term changes in productionand consumption patterns Possible to separate tasks between system-operator and grid owner in a snapshot perspective A TSO-solution is necessary to carry out the right development of the grid, responding to long-term changes in production- and consumption patterns 26

27 Conclusion The Nordic Experience Reduced prices to the customers Better service to the customers Cost efficient operation Flexible power flow Reduced overcapasity Focus on the economy 27

28 The Nordic market - why a success? (1) Political signals to form a common Nordic market Long tradition in co-operation A regulatory framework that committed to facilitate trade and establishment of a liquid spot market TSO ownership of a power exchange A spot power pool for producers that were established already in 1971 First mover advantages 28

29 The Nordic market - why a success? (2) An appropriate market concentration A non-mandatory power exchange: Based on market pricing not cost based simulations Price transparency No mix between balancing costs and power procurement costs Competition between power exchange and bilateral trade Easy access to relevant market information A market that facilitate establishment of service providers: Trade representatives Market analysts 29

30 WEB-SITES ww.nordel.org